NISP Jasa Marga - Surprising Margins in 1Q10

• Jasa Marga (JSMR) has released its 1Q10 results with net profit jumping by 54.2% YoY to reach Rp303bn compared to Rp197bn in 1Q09. This strong bottom line was also fuelled by solid revenue growth of 21.6% YoY to reach Rp1.01tn in 1Q10 vs Rp833bn in 1Q09. The revenue growth is driven by traffic growth that was magnified by the toll
tariff increase in 3Q09.

• The company’s 1Q10 result figure was came ahead of our expectations despite revenue only accounted for 24.1% of our full year estimate. This is understandable as traffic is usually the lowest during the first quarter of the coressponding year. However, the company’s operating and net profit beat our estimate as it already accounted for 29.3% and 30.4% of our full year estimate on the back of stronger margins and lower tax rate.

• While on a quarterly basis, the company managed to capsize its lower revenue figure in 1Q10 which was slighly down by 5.8% QoQ, with a 21.7% QoQ and 17.7% QoQ growth on its operating and net profit. Once again this was thanks to strong margins improvement which up by 6% - 11% from the past quarters.

• The company’s margins shot up during 1Q10 as operating and net margin rose by 6.4% from last year’s position to reach 50.5% and 30.0%, and marked as the record-high for the company’s EBIT margin. This strong improvement was contributed from the company’s success to lower toll operating expenses, mainly from salaries and allowance efficiencies.

• On operational side, in 1Q10 traffic volume grew by 3.1% to reach 226.5mn vehicles or already accounted for 23.5% of our full year estimate. We can say this figure slightly above our expectations as historically, first quarter traffic volume is the lowest during the year due to shorter days in February.

• Overall, Jasa Marga’s 1Q10 result beats our estimate due to stronger margins and strong traffic volume during first quarter. We are still evaluating our margin assumptions on our model as the company’s EBIT margin in 1Q10 beat our assumption by 8.3%. Another catalyst for the company is a scheduled tariff hike for its 2 toll roads in 2Q10 and the newly proposed land revocation law. With current valuation at 2010F PER of 14.0x and EV/EBITDA of 8.6x, Jasa Marga still looks attractive given its predictable stream of income and key benefits on Indonesia infrastructure structural stories. Maintain Buy.