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JSMR - 1Q20 Update

MINIMIZING THE IMPACT OF THE UPCOMING WAVES

As of 1Q20, JSMR booked a revenue of Rp2.7T, which rose by +8.6% (Y/Y) from Rp2.5T in the same period last year. Net profit stood at Rp588B, which grew flattish vs. that of 1Q19 at Rp585B, and was burdened by increasing finance expense to Rp774B from Rp525B (+47.4% Y/Y). Please note that the result does not fully take the travel restriction into account, as the latter has just started late March.

 

DOING A GREAT JOB

Poised on the impact of travel restriction, which slammed transaction volume, JSMR succeeded in maintaining its profitability margins: EBITDA/EBIT margins at 69.4%/55.9% in 1Q20 vs. 71.8%/56.1% in 1Q19, keeping margin deterioration to a minimum. Still, our estimate for this year’s net profit is penciled at Rp1.6T (-28.4% Y/Y) vs. last year’s Rp2.2T, as the traffic, the Company said, has contracted by 28% and 32% for both parent and subsidiary levels, respectively - as of the second week of June, possibly slashing top line figure.

 

OPENING A NEW GATE

As mentioned before, traffic volume deterioration during the travel restriction is a worrisome issue; thus, it could exacerbate the 2Q20 result, in our view. It is important to note that the Eid al-Fitr Holiday season, which usually occurs in the second quarter, was rescheduled by the Government to the end of the year, prompting the citizens to mudik in December. We view that while the traffic volume may not have fully recovered by 3Q20 no thanks to prolonged travel restriction policy, JSMR could reap the traffic volume jump in the 4Q20, under the condition that the coronavirus pandemic issue has eased up. In addition, JSMR expects that the Jakarta – Cikampek Elevated toll road may finally be tariffed in July, although the administration process is still going on; given its strong traffic volume, it could boost the Company’s revenue by the end of the year.

 

SLOWING THE EXPANSION

Looming coronavirus pandemic could slow down toll road tender and possibly toll road pestiture. That said, we do not forecast any additional concession right acquisition or pestiture that could impact JSMR’s balance sheet and income statement, at least for now.

 

VALUATION

We maintain our BUY recommendation with 12-month target price of Rp6,030/share (previous TP: Rp6,300/share), as the impact of travel restriction could cut top line figure down. TP reflects 12-month P/E and P/B of 20.5x and 1.7x, respectively. 

Mon June 22Th, 2020

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