Jasa Marga, In growing phase, CLSA

JSMR remains our preferred pick in infra space. It booked a strong 11%
YoY growth in 1Q12 traffic. While we trimmed our earnings to reflect
changes in accounting booking and some increases in ex-labor costs,
margin will continue to expand on the back of operational leverage and
more automation. We raised or DCF-valuation to Rp8,950/sh reflecting
higher assumptions on tariff and traffic and the additional NusaDua
project. Our TP reflects 28% disc to this DCF-valuation.


Good traffic growth in 1Q12
Traffic grew a strong 11% YoY in 1Q12. We believe there is more upside to
for the remainder of 2012 as JSMR is doing a 3 months trial of opening all toll
booths 24-7 starting Apr2012. We tweaked our revenue forecast by 3.3% in
FY12 to reflect higher traffic growth assumption but trimmed our FY13
revenue by 4.5% to reflect the push back of operation dates for the
remaining sections of Semarang-Solo and Surabaya-Mojokerto.

Margin to expand further
We trimmed our EBITDA margin assumption to 61.6% from 64% before, to
reflect the IFRS rule on overlay expense booking, and increase in operational
cost ex-“labor”. Market concern on higher cost due to additional 640
outsourced workers is overdone, given the cost is minimal and higher traffic
volume will more than offset it. We believe margin will continue to expand on
the back of operational leverage, and more automation. In the absence of
automation, revenue per employee had grown 30% in the past two years and
27% of workers now are outsourced which enable the company to save costs.

DCF-valuation of Rp8,950/sh
We increase our valuation to Rp8,950/sh, on the back of: 1) higher tariff and
traffic forecasts, and 2) adding Nusa Dua project into our forecast. Most of
JSMR’s new projects have their concession agreements amended by the
government, hence the IRRs become more attractive. We think there is more
upside to our assumptions from impact of connectivity to existing toll roads.

Best leverage to infra boom
While JSMR does not look particularly cheap vs peers from PE ratios, it offers
higher growth and higher ROE. It remains Indo’s best defensive play given
inflation-hedge tariff adjustment and a pure domestic business. Moreover, it is
a direct beneficiary for more infra boom in the future. We raised our TP to
Rp6,450/sh, at 28% discount to its DCF-valuation, at 0.9x PEG. BUY.

Download file : Indonesia JSMR Final