JSMR Aug2020

JSMR

Contact our analyst Eka

25% potential return, BUY
11th August 2020
Price Rp 4,010
Target price Rp5,000

Traffic decline improves

Amid the Covid-19 outbreak, JSMR’s toll and other operating revenue declined -15.7% YoY to IDR 4.34 trillion from IDR 5.16 trillion in 1H2019.
Revenue at the parent level (JSMR) decreased -19.3% YoY to IDR 3.17 trillion, while revenue at the toll road subsidiary level decreased -8.8% YoY to IDR 741 billion.
The decline of toll revenues from the pre-COVID has improved to around 39% both at mature and subsidiary levels, compared to the peak decline in the last week of May 2020, which was 58%.
We still believe, as the re opening will allow for a resumption of economic activities, that the rate of decline of JSMR’s toll road revenues will continue to improve.

•
1H2020FY: Bellow Expectation

Because of the drop in JSMR revenues, operating profit also declined by -20% YoY to IDR 2.48 trillion. The operating profit margin fell -5% to 48% in 1H2020.
EBITDA also declined -23.1% YoY to IDR 2.57 trillion from IDR 3.34 trillion in 1H2019. The EBITDA margin dropped to 59.2% from 64.9%.
Net income fell sharply -90% YoY to IDR 105.7 billion from IDR 1.1 trillion in 1H2019. In line with the drop in the Net profit margin from 21% in 1H2019 to only 2% in 1H2020.
In terms of liquidity, JSMR already negotiated with several banks to lower the interest rate by 100 bps at parent and subsidiaries’ levels and several banks agreed to increase loan facilities. All syndication banks at the subsidiary level agreed to postpone principal payments.
As the 1H2020 result is bellow expectation, we revise down our toll road revenue and profit 2020F targets to IDR 8.8 trillion and IDR 355 billion, which are decreases of -19% and -84% respectively.

•
Valuation: TP 5,000, Maintain BUY

Despite this, our one year target price IDR 5.000 offers investors a potential return of 25%, so we maintain our recommendation to BUY. This would also translate into a 2021F PE of 15x. Buy.