JSMR Dec2020

JSMR

Contact our analyst Eka

29% potential return, BUY
1st December 2020
Price Rp 4,140
Target price Rp5,350

Traffic showing improvement

Toll revenue has increased again In the week of 9 November – 15 November. Revenue has been steadily recovering and is now only 4.5% away from a return to normal conditions.
The recovery started in June, after the government eased restrictions and toll revenue gradually increased in line with improving traffic volume. In September revenue dropped again after the government, especially in Jakarta implemented PSBB restrictions again.
We expect that conditions will continue to improve as the PSBB transition continues, and we expect traffic volume to continue to increase gradually. Compared to most other businesses, toll revenues recover faster.

3Q2020FY: Margin Recovery

JSMR’s toll and other operating revenues in 3Q2020 grew double digit +55.1% QoQ to IDR 2.49 trillion compared to 2Q2020 IDR 1.61 trillion.
The increase is inline with increasing traffic volume in 3Q2020. For 9M2020, JSMR toll and other operating revenue still declined -14% YoY to IDR 6.8 trillion, but operating profit increased +20% QoQ to IDR 1.29 trillion in 3Q2020.
Net income turned positive at IDR 51.8 billion in 3Q2020 from a loss in 2Q2020 of IDR 482 billion, resulting in a higher net profit margin of 2%.
JSMR 3Q2020 improvement has not entirely offset the decline in the previous quarter. So for 9M2020, EBITDA still dropped -16.9% YoY to IDR 4.15 trillion from IDR 5.00 trillion in 9M2019. The EBITDA margin dropped to 60.7% from 62.9%. Net income also fell sharply -90% YoY to IDR 157.6 billion from IDR 1.5 trillion in 9M2019. In line with a drop in the Net profit margin from 19% in 9M2019 to only 2% in 9M2020.
As the situation continues to improve, we are expecting toll road revenues and profits for 2020F to be IDR 8.8 trillion and IDR 242 billion, which is a -19% and -89% decreases respectively.

Valuation: TP 5350, Maintain BUY

Our target JSMR shares price is IDR 5.350, offering investors a potential return of 29%, we maintain our recommendation to BUY. This would translate to a 2021F PE of 23x. Buy.