CLSA Jasa Marga reported a very strong 1H10 result

• Revenue for 1H10 increased 24% YoY to Rp2.1tn, banged in-line with our expectation. On a QoQ basis, revenue for 2Q10 increased 8% QoQ.

• A surprise on margin of 52.1% EBIT margin in 1H10 (which translated to 53.6% in 2Q10, vs 50.5% in 1Q10) . This was above our and street’s expectation. Hence, net profit for 1H10 reached Rp648bn (67% of our FY forecast). On a QoQ basis, net profit for 2Q10 increased 13.6% QoQ, and EBIT by 14.5% QoQ.

• Better cost management. In our note on 15Jun2010 “A steady business”, we highlighted that margins have expanded steadily in the past 4 years. JSMR implemented effective labor capital management in line with the growth of their toll road. Potential margin expansion will also come from the e-toll card service launched in 2009, however still in its early days.

• A steady investment. JSMR is now trading at 12.6x PE11, with 16% upside to our target price of Rp2,520/sh. We had expected margin next few years to be sustainable at ~45%. There is an upside risk to our profit numbers by 14-15% for FY10/11 if we use a stable margin of 50%. BUY.