CLSA Big report on Jasa Marga (JSMR IJ)

Big report on Jasa Marga (JSMR IJ) by Hadi

We understand that infrastructure and construction have not been playing a big part in Indonesia in the recent years. But we believe that President SBY’s potential second term may translate into the rebound in the sector’s fortunes.

In addition to cement, the best play in the sector is Jasa Marga (JSMR IJ), the country’s dominant toll road operator. JSMR controls 72% of the national network and is best positioned to benefit from government stimulus to build more roads. We like JSMR for its track record, quality assets, sound balance sheet, and strong CFs. Defensive qualities in this tough environment. We have a BUY recommendation with TP of 1,100.

Key points from the report:
Relative to landmass, Indonesia has one of the smallest road networks in Asia.
New regulations have improved investment climate in favour of toll road operators.
JSMR is the leading toll road operator in Indonesia, operating 496km of strategic toll roads (72% of the national networks).
Over the past 2 decades, JSMR has maintained an 18% average ROAE and 20% earnings CAGR.
Capacity expansion on track, has secured 6 new toll roads, 153 km in length.
Net gearing to peak at 1.4x in 2013.
Valuation: 8.4x 09CL PE, 4% div yield, and DCF TP of Rp1,100.
Maintain BUY.