JASA MARGA

EQUITY RESEARCH JSMR - Results Update - 14 February 2018

CIPTADANA SEKURITAS ASIA

BUY

Jasa Marga To bear heavier burden ahead

TP: Rp6,850 (+20.7%) Sector

Utilities

Bloomberg Ticker

JSMR IJ

Share Price Performance Last price (Rp)

5,675

Avg. daily T/O (Rpbn/USDmn)

53.1/3.9

3m

6m

12m

Absolute (%)

-14.0

3.2

19.5

Relative to JCI (%)

-21.8

-7.5

-2.2

52w High/Low price (Rp)

6,775/4,400

7,000

30% 25% 20% 15% 10% 5% 0% -5% -10% -15%

6,000 5,000 4,000 3,000 2,000 1,000

Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18

0

JSMR

1yr Rel. to JCI (RHS)

Outstanding shrs (mn)

7,258

Mkt. Cap (Rpbn/USDmn)

41,188/3,018

Estimated free float (%)

30.0

Major shareholders Government of Indonesia

70.0%

Public

30.0%

EPS Consensus Ciptadana

Cons.

% Diff

2018F

246.4

318.6

-22.7

2019F

247.4

335.1

-26.2

2020F

270.1

389.6

-30.7

Fahressi Fahalmesta +62 21 2557 4800 ext. 735 [email protected]

http://www.ciptadana.com

FY17 results: positive growth across the board FY17 net profit came in at Rp2.2 tn, soared by 16.5% YoY, generally in-line with (96.3% and 98.8%) our and consensus FY17F net profit, respectively. The strong improvement on bottom line was particularly attributable to Rp563 bn one-off divestment gain. Excluding the one-off effect, core net profit slipped by 1.4% YoY to Rp1.7 tn. Net revenue (including net construction revenue) modestly increased by 2.3% YoY, boosted by integration on its primary highways segment such as Jagorawi (+25.4% YoY) and Jakarta – Tangerang (+30.1% YoY). Operating profit somewhat rose 6.3% YoY to Rp4.15 tn, and led the operating margin expanded to 45.8% (vs. 44.3% in FY16) as toll and other operating expenses declined by 6.2% YoY; underpinned by lower cost of maintenance services, fuel sold, and property as well as joint operation expenses that no longer exist. Integration system: JSMR still able to manage the positive traffic volume growth JSMR ended the FY17 consolidated traffic volume at 1.39 bn, increased marginally by 2.6% YoY, on highway system integration which lead to lower number of transactions. Traffic contribution from parent reached 1.28 bn (vs. 1.26 bn in FY16), boosted by JORR segment and Jakarta intra urban toll road which grew by 36.2% YoY and 4.8% YoY, respectively. Subsidiary segment recorded 110.13 mn (+7.3% YoY), buoyed by JORR W2N section which has biggest contribution among the other subsidiaries experienced 12.6% YoY growth to 30.5 mn. Please note,the traffic of 2 new toll road in operation comprise of Medan – Kualanamu and Gempol – Pasuruan totaling 1.56 mn have accounted in FY17. In 2018, we expect traffic volume to see 4.9% growth to 1.47 bn. 2018 outlook: Heavier interest burden to hamper bottom line growth During high capex cycle, JSMR debt has been increasing by approximately 101% to Rp34.67 tn in FY17 from Rp17.22tn in FY15. Last year, DER hit 2.3x, while back in FY15, it was 1.5x. However, interest FY17 interest coverage ratio stood at 4.07x, which reflected that JSMR still has ability to cover their interest burden. Moving forward, in 2018 we project the Company will see negative bottom line growth on higher interest and other expenses (A-life program). We expect FY18 net profit to stand at Rp1.78 tn or relatively flat compare to core earnings in FY17. Yet, we see JSMR is well-poised to witness the accelerating toll road development during intensifying focus of government to enhance the infrastructure quality. We also consider the solid ability of the Company to fulfill required capital by utilizing variety of essential financing. As such, we believe with better outlook of Indonesian economic growth and lengthen toll road in operation; the traffic volume whilst a source of revenue growth potentially improve going forward. Maintain BUY rating with lower TP of Rp6,850 We maintain our BUY call on JSMR with lower DCF based TP of Rp6,850 (+20.7% upside potential). On our valuation mode, we used 9.8% WACC and 4% growth rate. Currently, the stock trades at 23x forward P/E 2018, 7% above its 5-year historical average P/E at21.4x. Exhibit 1 : Financial Highlights Year to 31 Dec

2016A

2017A

2018F

2019F

2020F

Revenue (Rpbn)

8,879

9,080

10,788

12,004

13,623

Operating profit (Rpbn)

3,907

4,155

4,628

5,114

5,831

Net profit (Rpbn)

1,889

2,200

1,788

1,795

1,961

EPS (Rp)

277.0

303.2

246.4

247.4

270.1

EPS growth (%)

28.4

9.5

-18.7

0.4

9.2

EV/EBITDA (x)

12.9

13.3

13.8

14.1

12.4

PER (x)

20.5

18.7

23.0

22.9

21.0

PBV (x)

2.8

2.7

2.5

2.3

2.1

Dividend yield (%) ROE (%)

0.8

1.4

1.6

1.3

1.3

13.8

14.6

10.8

10.1

10.2

Source : JSMR, Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report

2



Exhibit 2: JSMR FY17 Result Rp bn

FY17

FY16

YoY

4Q17

3Q17

qoq

Total core revenue*

9,080

8,879

2.3%

2,209

2,287

-3.4%

Toll ang Other Operating Expenses

-3,772

-4,023

-6.2%

-692.2

-975

-29.0%

G&A Expenses

-1,152

-949

21.4%

-367.8

-278

32.4%

Total operating expenses

-4,925

-4,972

-1.0%

-1,060

-1,253

-15.4%

Operating Profit

4,155

3,907

6.3%

1,149

1,034

11.1%

45.8

44.3

1.42

52.0

45

6.81

Net Finance Income (Expense)

-1,269

-1,509

-15.9%

-550.50

-248

121.8%

Other Income (Expense)

364.08

251.29

N/A

-9.05

439

N/A

3,250

2,650

22.7%

590

1,225

-51.9%

35.8

30.1

5.72

27

54

-26.87

-1,157

-847

36.6%

-337

-344

-1.9%

107

86

23.6%

46

5

879.0%

2,200

1,889

16.5%

298

886

-66.3%

24.2

20.7

3.55

13.50

38.74

-25.24

Operating margin (%)

Pre-tax profit

Pretax margin (%) Tax Minority interest Net profit

Net profit margin (%)

% of 2017F Cons

2017F

% of 2017F

9,253

98.1%

9,472

95.9%

4,173

99.6%

4,211

98.7%

3,126

104.0%

3,121

104.1%

2,284

96.3%

2,228

98.8%

Cons

Exhibit 3: JSMR Financial Forecast Changes Rp bn

18F

19F

Old

New

Revenue

10,513.0

10,787.6

Operating

4,783.0

4,627.9

EBITDA

5,985.0

5,787.4

Net profit

2,264.0

1,788.4

Chg

Old

New

2.6%

11,946.0

12,004.4

0.5%

-3.2%

5,436.0

5,113.9

-5.9%

-3.3%

6,750.0

6,438.2

-4.6%

-21.0%

2,605.0

1,795.4

-31.1%

Operating margin

45.5%

42.9%

45.5%

42.6%

EBITDA margin

56.9%

53.6%

56.5%

53.6%

Net margin

21.5%

16.6%

21.8%

15.0%

Chg

We have fine-tuned our revenue projection and adjust interest as well as other expenses. We are quite conservative about the top line projection, as we do not sure that the revenue will be above Rp11tn. Higher debt to finance the capex as well as presence of other expenses buoyed by employees program, definitely will lead push down the net profit. Hence, we cut our net profit assumption to Rp1.78tn (-21%) and Rp1.79tn (-31.1%), implying 16.6% and 15% net margin.

Please see analyst certification and other important disclosures at the back of this report

3



Exhibit 4: Total Traffic Volume and Growth Total Traffic (In bn) (LHS) 1.800 1.600 1.400 1.200 1.000 0.800 0.600 0.400 0.200 -

Exhibit 5: JSMR Operating and Net Margin Growth (RHS)

1.375 1.367 1.397 1.250 1.314

1.466

1.543

Operating Margin 6%

50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

5% 4% 3% 2% 1% 0% -1%

2013 2014 2015 2016 2017 2018F 2019F

45.75% 38.68%

45.76%

42.90%

32.06%

16.2%

19.6%

19.2%

FY14

FY15

FY13

21.3%

24.2% 16.6%

FY16

FY17E

FY18F

Source : Ciptadana

Exhibit 6: Net Revenue (including net construction) Revenue

Exhibit 7: JSMR Other Operating Revenue 1,200

Growth

14,000

20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

12,000 10,000 8,000 6,000 4,000 2,000 FY13 FY14 FY15 FY16 FY17 FY18F FY19F

1,000

Petroleum revenues

Land Rent

Toll Road Operating Services

Advertisement

Others 800 600 400 200 2013

Source : Ciptadana

Source : Ciptadana

Exhibit 8: Total Traffic Volume and Growth

Exhibit 9: ROE

Total Debt (LHS)

3.5

50,000.0

3.0 2.5

40,000.0

2.0

30,000.0

1.5

20,000.0

1.0

10,000.0 2013 2014 2015 2016 2017 2018F 2018F

2014

2015

2016

2017

2018F

21.0%

DER (RHS)

60,000.0

Source : Ciptadana

42.30% 44.01%

27.8%

FY12

Source : Company and Ciptadana

Net Margin

19.0% 17.0% 15.0% 13.0% 11.0% 9.0%

0.5

7.0%

-

5.0% FY12

FY13

FY14

FY15

FY16

FY17 FY18F FY19F

Source : Ciptadana


4



Exhibit 10 - Income Statement Year to 31 Dec (Rpbn)

2016A

2017A

2018F

2019F

2020F

Revenue

8,879

9,080

10,788

12,004

13,623

COGS

-4,023

-3,772

-4,865

-5,486

-6,212

Gross profit

4,856

5,308

5,922

6,518

7,411

-949

-1,152

-1,295

-1,405

-1,580

Oper. profit

3,907

4,155

4,628

5,114

5,831

EBITDA

4,786

5,160

5,787

6,438

7,307

0

0

0

0

0

-1,509

-1,269

-2,077

-2,684

-3,097

Oper. expenses

Interest income Interest expense Other income (exp.) Pre-tax profit Income tax Minority interest

251

364

-131

-71

-157

2,650

3,250

2,419

2,360

2,577

-847

-1,157

-713

-647

-706

86

107

82

82

90

1,889

2,200

1,788

1,795

1,961

Year to 31 Dec (Rpbn)

2016A

2017A

2018F

2019F

2020F

Cash & cash equivalent

4,133

7,030

3,847

2,943

2,000

0

0

0

0

0

Net profit

Exhibit 11 - Balance Sheet

Acct, receivables Inventory Other curr, asset Total current asset Fixed assets - net

87

134

162

183

207

8,745

11,822

13,874

15,444

11,850

12,965

18,987

17,883

18,570

14,057

885

1,036

1,402

1,798

2,240

Other non-curr.asset

39,492

58,283

67,474

76,072

83,172

Total asset

53,500

79,193

87,783

97,580

100,763

ST debt + curr. maturity

12,252

5,555

5,744

6,318

10,252

135

351

405

427

431

Acct, payable Advances received

0

375

400

400

400

Other curr. liab

6,240

18,717

15,569

13,466

15,228

Long term debt

15,124

29,113

36,560

45,932

40,838

3,410

6,723

10,373

10,841

11,720

Total liabilities

37,161

60,833

69,052

77,383

78,869

Shareholder equity

13,679

15,098

16,574

17,796

19,169

Minority interest

2,660

3,262

2,158

2,401

2,725

Total liab + SHE

53,500

79,193

87,783

97,580

100,763

2016A

2017A

2018F

2019F

2020F

Other non-curr, liab,

Exhibit 12 - Per Share Data (Rp) EPS BVPS DPS FCF per share

277.0

303.2

246.4

247.4

270.1

2,005.4

2,080.2

2,283.5

2,452.0

2,641.2

43.0

78.1

90.9

73.9

74.2

-1,355.3

-468.5

-1,030.1

-1,126.7

442.8

Source : JSMR, Ciptadana Estimates


5


CIPTADANA SEKURITAS ASIA Exhibit 13 - Cash Flow Year to 31 Dec (Rpbn)

2016A

2017A

2018F

2019F

2020F

1,889

2,200

1,788

1,795

1,961

879

1,005

1,160

1,324

1,476

-4,767

13,306

-1,371

-3,086

6,394

775

96

1,173

1,659

2,083

CF-Oper activities

-1,225

16,607

2,750

1,693

11,914

Capital expenditure

-10,688

-22,411

-10,302

-10,266

-8,928

2,668

2,403

75

395

228

-8,020

-20,007

-10,227

-9,871

-8,700

Net income Depreciation Chg in working cap. Other

Others CF-Investing activities Net change in debt

9,098

7,430

7,268

9,616

-1,571

Net change in equity

0

0

0

0

0

Dividend payment

0

0

0

0

0

Other financing

949

-1,131

-2,975

-2,342

-2,586

10,048

6,298

4,293

7,274

-4,157

802

2,898

-3,183

-904

-943

Cash - begin of the year

3,330

4,133

7,030

3,847

2,943

Cash - end of the year

4,133

7,030

3,847

2,943

2,000

2016A

2017A

2018F

2019F

2020F

Revenue (%)

16.1

2.3

18.8

11.3

13.5

Operating profit (%)

20.8

6.3

11.4

10.5

14.0

Net profit (%)

28.8

16.5

-18.7

0.4

9.2

Gross margin (%)

54.7

58.5

54.9

54.3

54.4

Operating margin (%)

44.0

45.8

42.9

42.6

42.8

EBITDA margin (%)

53.9

56.8

53.6

53.6

53.6

Net margin (%)

21.3

24.2

16.6

15.0

14.4

CF-Financing activities Net cash flow

Exhibit 14 - Key Ratios Year to 31 Dec Growth

Profitability Ratios

ROA (%)

3.5

2.8

2.0

1.8

1.9

ROE (%)

13.8

14.6

10.8

10.1

10.2

Current ratio (x)

0.7

0.8

0.8

0.9

0.5

Quick ratio (x)

0.7

0.8

0.8

0.9

0.5

Cash conversion cycle (days)

0.0

0.0

0.0

0.0

0.0

Inventory turnover (days)

7.9

13.0

12.2

12.2

12.2

Receivable turnover (days)

0.0

0.0

0.0

0.0

0.0

Payable turnover (days)

5.6

9.8

12.8

12.7

11.5

Interest cover (x)

3.2

4.1

2.8

2.4

2.4

Debt to equity ratio (x)

2.0

2.3

2.6

2.9

2.7

Net debt to equity (x)

1.7

1.8

2.3

2.8

2.6

Liquidity Ratios

Activity Ratio

Solvency Ratio

Source : JSMR, Ciptadana Estimates


6


CIPTADANA SEKURITAS ASIA EQUITY RESEARCH

HEAD OF RESEARCH Arief Budiman Strategy, Automotive, Heavy Equipment, Construction, Shipping T +62 21 2557 4800 ext 819 E [email protected]

ANALYST Erni Marsella Siahaan, CFA Banking T +62 21 2557 4800 ext 919 E [email protected]

ANALYST Yasmin Soulisa Property, Plantations T +62 21 2557 4800 ext 799 E [email protected]

ECONOMIST Imanuel Reinaldo T +62 21 2557 4800 ext 820 E [email protected]

ANALYST Niko Margaronis Telecommunication, Tower, Healthcare T +62 21 2557 4800 ext 734 E [email protected]

ANALYST Fahressi Fahalmesta Cement, Toll Road, Poultry T +62 21 2557 4800 ext 735 E [email protected]

ANALYST Stella Amelinda Consumer T +62 21 2557 4800 ext 740 E [email protected]

ANALYST Fransisca Maharani Putri Media, Retail T +62 21 2557 4800 ext 760 E [email protected]

TECHNICAL ANALYST Trevor Gasman T +62 21 2557 4800 ext 934 E [email protected]

RESEARCH ASSISTANT Sumarni T +62 21 2557 4800 ext 920 E [email protected]

EQUITY SALES Co HEAD OF INSTITUTIONAL SALES Dadang Mulyana Plaza ASIA Office Park unit 2 Jl. Jend. Sudirman Kav. 59 Jakarta - 12190 T +62 21 2557 4800 ext 838 F +62 21 2557 4900 E [email protected]

Co HEAD OF INSTITUTIONAL SALES The Fei Ming Plaza ASIA Office Park unit 2 Jl. Jend. Sudirman Kav. 59 Jakarta - 12190 T +62 21 2557 4800 ext 807 F +62 21 2557 4900 E [email protected] SURABAYA

BRANCH OFFICES JAKARTA - MANGGA DUA Komplek Harco Mangga Dua Rukan Blok C No.10 Jl. Mangga Dua Raya Jakarta - 10730 T +62 21 600 2850 F +62 21 612 1049

JAKARTA - PURI KENCANA Perkantoran Puri Niaga III Jl. Puri Kencana Blok M8 No.2E Kembangan Jakarta - 11610 T +62 21 5830 3450 F +62 21 5830 3449

SURABAYA Intiland Tower Surabaya Ground Floor Suite 5 & 6 Jl. Panglima Sudirman 101-103 Surabaya - 60271 T +62 31 534 3938 F +62 31 534 3886

SEMARANG Gedung Menara Suara Merdeka 6th Floor Unit 02 Jl. Pandanaran No.30 Semarang - 50134 T +62 24 7692 8777 F +62 24 7692 8778


7

EQUITY RESEARCH CIPTADANA SEKURITAS ASIA

JSMR - Results Update - 14 February 2018

Analyst Certification Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her personal views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation. Disclaimer This report does not constitute an offer to buy or sell any security/instrument, invitation to offer or recommendation to enter into any transaction. Nor are we acting in any other capacity as a fiduciary to you. When making and investment decision, you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting this report, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice (and any risks associated with any transaction and our disclaimer as to these matters. The information contained in this report is based on material we believe to be reliable; however, we do not represent that it is accurate, current, complete, or error free. Assumptions, estimates and opinions contained in this report constitute our judgment as of the date of the document and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results. PT CIPTADANA SECURITIES AND ITS AFFILIATES SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS REPORT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF. Disclaimer: This document is not intended to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e. securities mentioned herein or of the same issuer and options, warrants or rights to or interest in any such securities). The information and opinions contained in this document have been compiled from or arrived at in good faith from sources believed to be reliable. No representation or warranty, expressed or implied, is made by PT CIPTADANA SECURITIES or any other member of the Ciptadana Capital, including any other member of the Ciptadana Group of Companies from whom this document may be received, as to the accuracy or completeness of the information contained herein. All opinions and estimates in this report constitute our judgment as of this date and there can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. The information in this document is subject to change without notice; its accuracy is not guaranteed; and it may be incomplete or condensed.


8

JASA MARGA

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