JSMR May2020

JSMR

Contact our analyst Eka

46% potential return, BUY
13 May 2020
Price Rp 3,430
Target price Rp5,000

Expecting a lower 2020F performance

Due to the covid-19 outbreak and physical distancing which is extended until May 2020, JSMR’s performance in terms of toll road revenues, both mature and from subsidiaries, has declined by about 50%.
JSMR mature toll road revenues has decreased 70% for weekends, and 42% for weekdays. The decrease in revenue will be seen in the 2Q2020 performance as the 1Q2020 performance was still sustained by higher traffic volume in January - February 2020.
In response, JSMR plans to improve efficiency by cutting operating expenses by approximately IDR 500 billion, slashing capital expenditure by IDR 2 trillion and postponing commercial operating targets for several new toll roads.
JSMR will also reschedule principal payments and extend tenors for loan facilities at both subsidiary and parent level. Interest rates will be lowered to 7%, and payments will be adjusted to match with JSMR’s cash flow.
For the 2020F full year result, we expect toll road revenues will decrease by 25% yoy to IDR 8.42 trillion.

2019FY Results: Improved EBITDA

JSMR recorded revenue of IDR 10.89 trillion, up +12.3% yoy in 2019FY. EBITDA grew +14.3% yoy to IDR 6.88 trillion due to toll revenue increases and savings from operational direct costs, which resulted in an increase in the EBITDA margin from 61.6% in 2018 to 62.7% in 2019.
Toll revenue at the subsidiary level increased 40.3% yoy from IDR 1.29 triliion in 2018 to IDR 1.82 trillion in 2019. The higher toll revenue contribution at the subsidiary level is the result of additional new toll road operations. In 2018 the contribution from toll road subsidiaries was 14%, while in 2019 it was 18%.
Net income grew +21% yoy to IDR 2.21 trillion.
We are expecting 2020F net income of IDR 1.2 trillion, which would mean a 45% drop, in line with the lower toll road revenue in 2020F.

Valuation: TP 5,000, Maintain BUY

We update our one year target price for JSMR to IDR 5,000, offering investors a potential return of 46%. This would also translate into 2021F PE of 16x. We recommend BUY.