by Credit Suisse
Jasa Marga (JSMR, O, PT Rp6,750): Tariff Increase For Jakarta-Cikampek
· The Ministry of Transportation has approved 10% tariff hike for the Jakarta-Cikampek toll road, which will be effective starting October 7, 2012. By regulation, toll-road tariff is increased every two years, where the magnitude of the increase is based on the average inflation rate.
· Ella Nusantoro has accounted the aforesaid tariff increase in her JSMR earnings model. The Jakarta-Cikampek toll road, which posted 13% traffic growth, is one of the busiest segments in Greater Jakarta, which contributed 16% and 15% to JSMR’s traffic volume and revenue in 8M12.
· Ella continues to like JSMR despite its demanding valuation this year. She believes the completion of seven new toll-roads starting next year – totalling 83 km in length (or 15% from the current total of 545 km) – should allow JSMR’s earnings to grow at 21% CAGR over 2014-17, while its cash flows will turn positive from 2015. Ella reiterates Outperform rating on JSMR with DCF-based TP of Rp6,750.
Sales commentary: The certainty of toll tariff increase has been cemented in the government regulation and carried out consistently since the law was introduced in 2005/06. Though Indonesia’s inflation rate would be tame in 2012/13, JSMR should benefit from traffic volume growth acceleration with the operations of new toll roads. In addition, the land clearing bill, which is now fully in effect, opens up the opportunities for JSMR to get and construct more new toll road projects in the future.