Danareksa Jasa Marga (JSMR IJ, Rp2,300 BUY) Better than expected results

Net profits up significantly
Net profits surged 63.7% yoy to Rp2.1tr in 1H10 thanks to tariff increases effective in September 09. Traffic volume grew by an average 3.3% yoy to 2.6mn cars per day. All in all, the result is above expectations - mainly on lower-than-expected opex, interest expenses and tax rate.

Steady revenues growth
Total revenues rose 8.0% qoq to Rp1.1tr in 2Q10. Average traffic volume grew 3.9% qoq to 2.5mn vehicles per day. Moreover, we suspect Jasa Marga enjoyed better average tariffs - especially from the increasing long-distance travelers. Notably, the airport expressway has experienced an increase in tariffs since the change to an open system. With a recovery in traffic volume, this section saw much higher revenues.

Modest traffic volume growth
The 3.3% yoy increase in daily average traffic volume in 1H10 came from additional traffic from the new toll road sections such as the Jakarta Outer Ring Road and the Bogor Ring Road. The integration of the Jakarta Ring Road has also induced growth in the Jakarta Cikampek section, Purbaleunyi, Jakarta Tangerang. Furthermore, the airport expressway has seen a recovery in traffic volume since the change from a closed system to an open system in September 09.

Flat opex
Surprisingly, Jasa Marga booked flat opex of around Rp500bn in 2Q10. This caused the opex to sales ratio to fall to 47.5% in 2Q10 from 49.5% in 1Q10. There was a sharp increase in opex from joint operations but this was negated by a significant fall in G&A expenses, leaving the total opex relatively flat. As a result, operating income was boosted. Hence, the EBITDA margin expanded from 60% in 1Q10 to 63.3% in 2Q10. However, please note that we need to crosscheck with the company to see whether the flat opex is sustainable or not.

BUY maintained
There is a good chance that we make an upgrade due to the lower than expected tax and opex. However, we still need to make cross checks with the company. For the time being, we maintain our BUY call on the counter.