3Q12 earnings: In line with our and consensus’ estimates
§ 3Q12 net profit down 26% q-q on extraordinary gain absence: JSMR reported 3Q12 bottom line of IDR379b, down 26% q-q and 9% y-y, in line with our and consensus estimate (77%), as the company booked IDR147b extraordinary gain in 2Q12 from the 4% CMNP stake sale. However, strong 9M12 volume growth of 11% y-y and the full-impact of periodic tariff adjustments have supported 9M12 net profit to reach IDR1.3t, +39% y-y.
§ Flat q-q top line due to seasonality (Lebaran): JSMR reported flat 3Q12 volume growth of 0.4%, resulting in 3Q12 top line growth of 2% q-q (due to Lebaran seasonality) and 16% y-y.
§ Manageable opex to support 3Q12 operating profit: Manageable opex has helped 3Q12 operating profit to reach IDR678b, +5% q-q and 10.5% y-y, translating to improved operating margin of 47% (from 46% in 2Q12).
Outlook: Beneficiary of more government projects ahead
Aside from periodic tariff adjustments and additional new toll roads being operational in the coming years, JSMR will continue to benefit from increased government projects in toll road developments. Additional toll roads will also come from potential acquisitions from stalled projects, we believe. Going into 2013, we estimate JSMR’s revenue to reach IDR6.9t, up 22% y-y, helped in part by small contribution from the operation of two additional new toll roads: 10 km Nusa Dua – Ngurah Rai – Benoa (Bali) and 7.7 km JORR W-2 North).
Recommendation & valuation: BUY on 23% upside
JSMR trades on high 2013 PE of 21x due to its dominant toll-road position and consistent earnings growth, which will be supported by more toll road acquisitions. With government pump-priming efforts in 2013-14 elections likely to result in positive sentiment on infrastructure-related plays, we retain a BUY on JSMR with DCF-based TP of IDR7,000, translating to 23% upside.