Jasa Marga : Boost In Revenue Driven by New Toll Roads In Th

Bareksa.com - Toll road expansion updates. There are four new toll road that PT Jasa Marga Tbk (JSMR) will operate in 2014. The toll roads are Kedung Halang–Kedung Badak, Ungaran-Bawen, Kebon Jeruk–Ulujami, and Gempol Pandaan. It adds 6.4% or 35.6km of JSMR total toll in operations, totaling to 589.6km. An additional of 48.2km and 88.2 km is forecasted to be operational in 2015 and 2016. JSMR will operate a total toll road length of 726 km by 2016.

Adjustments in 2014-15F. The first changes in our forecast is due to adjustment of 2013 result that automatically affected 2014F/15F figures. FY13 earnings did not meet our forecast by 11.3%. Showing that our forecast was to bullish as well as consensus. Secondly, As toll road construction completion period was slightly move ahead, we decrease our construction revenue in 2014F/2015F by –16%/-39%. This will only affect JSMR topline as construction revenue and expense are measured with a cost-plus method. Lastly, we have increase our additional toll road length in assumption in 2014F/2015F by 70%/7% as we refer to the Company’s new guideline. Income tax becomes 27%. The adjustments translates to an upgrade in the Company’s earnings by 2% and 30%.

1Q14 financial result. The Company’s 1Q14 revenue performs well as it came in strong at Rp 1.52 tn, growing 11% YoY. The increase occurs as the 14% tariff adjustment of 2013 starts to take. JSMR’s earnings grows quite significantly by 17% YoY to Rp 376 bn, forming 24%/23% towards our forecast and consensus.

Valuation. Our new TP of Rp 7,000 (+4.5% than previous) implies 30.9x 2014F P/E. The stock currently trades at 26x 2014F P/E. BUY

Source: Jasa Marga, Buana Research

We adjust our 2014F/15F based on 2013 results and adjusted a few of our assumptions. FY13 earnings did not meet our forecast by 11.3% (FY13 Rp 1.3 tn vs. FY13F Rp 1.5 tn). Showing that our forecast was to bullish as well as consensus. The 2013 result adjustment has a carryover effect to 2014F/15F. Additionally, management has given new deadline on their project and there are no new projects. As toll road construction completion period was slightly move ahead, we decrease our construction revenue in 2014F/2015F by –16%/-39%. This will only affect JSMR topline as construction revenue and expense are measured with a cost-plus method. We have increase our additional toll road length in assumption in 2014F/2015F by 70%/7% as we refer to the Company’s new guideline. Lastly, we reduce our income tax assumption to 27% as we refer to 2013 figure. The adjustments translates to an upgrade in the Company’s earnings by 2% and 31%.

Boost in revenue that is driven by new toll roads in the next three years
In 2014, the Company is aiming to operate a number of new toll roads. The four ready to operate new toll roads are namely; Gempol-Pandaan (length of 13.6 km), Kedung Halang-Kedung Badak (length of 2 km), Kebon Jeruk-Ulujami (length of 7.7 km), and lastly Ungaran-Bawen (12.3 km).

Rigorous expansion going forward. Management has been emphasizing on expansion for the next 3 to 4 years. Shown below are the projects that the Company aims to complete in respect to the targeted period of operation.

2014: there are four new toll roads that will be operational.
> Gempol-Pandaan with a length of 13.6km
> Ungaran-Bawen with a length of 12.3km
> Kebon Jeruk-Ulujami with a length of 7.7km
> Kedung Halang-Kedung Badak with a length of 2km

2015: there will be two new toll roads in operations.
> Sepanjang-Mojokerto with a length of 34.3km
> Gempol-Rembang with a length of 13.9km

2016: there will be five new toll roads in operations.
> Bawen-Solo with a length of 49.5km
> Cengkareng-Kunciran with a length of 14.2km
> Kunciran-Serpong with a length of 11.2km
> Rembang-Pasuruan with a length of 8.1km
> Kedung Badak-Darmaga with a length of 5.2km

*Andre Maningkas is equity analyst of PT Buana Capital. This article is part of the Equity Research of PT Buana Capital