Post on 21-Mar-2019
Indonesia Initiating Coverage
See important disclosures at the end of this report 1
6 February 2019 Infrastructure | Toll Roads
Jasa Marga (JSMR IJ) Buy
New Toll Roads To Boost Growth; Initiate BUY Target Price (Return) IDR6,100 (+27%)
(+18%) Price: IDR4,820
Market Cap: USD2,504m
Avg Daily Turnover (IDR/USD) 40,278.15m/2.88m Initiate coverage with BUY and Street-high DCF-based IDR6,100 TP, 27%
upside, while reflecting 11.7-10.2x FY19F-20F EV/EBITDA. Jasa Marga is the
key beneficiary of a fully-connected Merak-Surabaya toll road that began
operating at end-2018. In mid-2019, it is set to kick off operations of the
Jakarta-Cikampek Elevated Toll Road and adjust tariff rates. New toll roads
ahead – Kunciran-Serpong and Serpong-Cinere (part of Jakarta’s Outer Ring
Road 2 or “JORR2”) – should boost traffic volume, being in areas with high
traffic density. Capex should decline in 2020 onwards. Premised on this, it is
set to reap the fruits of an aggressive expansion over the past four years. The
recent inclusion into the Jakarta Islamic Index is also share price positive.
JSMR is the key beneficiary of the full connection of the Trans-Java Toll
Road, being Indonesia’s leading toll road operator. Its traffic volume growth
should accelerate after the full connection of the 933km Merak-Pasuruan Toll
Road. This road’s EBITDA margin is 70-80% higher than JSMR’s older
projects, which record margins of c.60%. It owns 33 toll road concessions,
with roads spanning 1,527 km. It has a 65% market share in commercial toll
road length (788km) and 80% market share of toll road transaction volumes.
Jakarta-Cikampek to further boost earnings. This elevated toll road is
scheduled to commence operations in mid-2019. This gives JSMR room to
adjust tariffs, as customers are likely to opt for roads with less traffic and
shorter travelling times. The Jakarta-Cikampek toll road – connecting Jakarta
and its industrial cities – is the busiest inter-city toll road in Indonesia.
Kunciran-Serpong and Serpong-Cinere to boost traffic. These sections –
scheduled for 2019 – are part of JORR2 and connect satellite residential
cities around Jakarta, ie Depok, Serpong, and Tangerang. We believe the
potential for traffic to increase on these roads is substantial.
Benefiting from aggressive expansion. Since major toll roads are
scheduled begin in 2018-2019 – mainly on the Trans-Java Toll Road and
JORR2, which have high traffic volume – JSMR should start benefiting from
having aggressively expanded during the past four years. Its toll road length
has grown >80%. As new toll roads mature, it has more room to restructure
assets and strengthen its balance sheet. In 2015-2019F, Indonesia has/will
have c.1,920km of additional toll roads, roughly half developed by JSMR.
Good for the long term. The toll road business has seen consistent traffic
volume growth, making JSMR attractive for long-term investors. The key
downside risk: high financing cost, which is normal given its massive recent
4-year toll road expansion. JSMR has extensive experience in raising funds,
as well as advanced experience in alternative fund-raising: future revenue-
backed securities, project and Komodo bonds, and mutual fund investments
with limited participation. This helps lower D/E.
Analysts
Andrey Wijaya
+6221 2970 7058
andrey.wijaya@rhbgroup.com
Mutiara Nita
+6221 2783 0719 mutiara.nita@rhbgroup.com
Share Performance (%)
YTD 1m 3m 6m 12m
Absolute 12.6 0.4 15.3 (3.6) (13.9)
Relative 8.0 (2.9) 5.6 (11.5) (11.7)
52-wk Price low/high (IDR) 3,800-5,850
Source: Bloomberg
Forecasts and Valuation Dec-16 Dec-17 Dec-18F Dec-19F Dec-20F
Total turnover (IDRbn) 8,832 8,922 11,105 12,577 14,140 Reported net profit (IDRbn) 1,889 2,200 2,218 2,092 2,284
Net profit growth (%) 28.8 16.5 0.8 (5.7) 9.2
EPS (IDR) 259 301 304 287 313
P/E (x) 18.6 16.0 15.9 16.8 15.4
P/B (x) 2.5 2.0 1.8 1.6 1.5
Dividend Yield (%) 0.8 1.6 1.9 1.8 1.9
EV/EBITDA (x) 12.3 11.5 10.4 8.8 7.8
Return on average equity (%) 13.2 12.7 11.3 9.7 9.7
Net gearing (x) 1.3 1.4 1.8 2.6 2.9
Source: Company data, RHB
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 2
Financial Exhibits
Financial model updated on: 2019-01-31
Asia
Indonesia
Infrastructure – Toll Road
Jasa Marga
Major shareholders (%)
Republic of Indonesia 70.0
Valuation basis
Our DCF assumptions include: i. WACC of 8.5%; ii. TG of 0%; iii. 35 years cash flow, in line with concession
period.
Key drivers
Our forecasts are most sensitive to changes in: i. Higher traffic volume, which is driven by the full
connection of the Trans-Java Toll Road and JORR2 commencing operations;
ii. Higher toll road tariffs, especially for the Jakarta-Cikampek elevated road;
iii. Lower debts as a result of divestment or asset securitisation of subsidiaries.
Key risks
The downside risks include: i. Higher financing costs; ii. Rising toll road construction costs; iii. Change in government regulations on toll roads.
Company Profile
JSMR is the leading toll road operator in Indonesia. The company collects toll payments, maintains road surfaces, and offers other toll road-related services. It has 33 toll road concessions, with roads spanning 1,527 km. It has a 65% market share in commercial toll road length (788km) and 80% market share of toll road transaction volumes.
Source: Company data, RHB
Financial Summary 2016 2017 2018F 2019F 2020F
EPS (IDR) 259 301 304 287 313
DPS (IDR) 40 78 91 86 94
BVPS (IDR) 1,966 2,377 2,680 2,965 3,217
Valuation Metrics 2016 2017 2018F 2019F 2020F
P/E (x) 18.6 16.0 15.9 16.8 15.4
P/B (x) 2.5 2.0 1.8 1.6 1.5
Dividend Yield (%) 0.8 1.6 1.9 1.8 1.9
EV/EBITDA (x) 12.3 11.5 10.4 8.8 7.8
Income Statement (IDRb) 2016 2017 2018F 2019F 2020F
Total Turnover 8,832 8,922 11,105 12,577 14,140
Gross Profit 4,856 5,308 6,417 7,301 8,222
EBITDA 5,025 5,361 5,956 6,992 7,949
Depreciation and Amortisation 859 713 946 1,262 1,471
Operating Profit 4,166 4,648 5,010 5,730 6,478
Equity Income (7) (129) (33) (38) (42)
Finance Cost - net (1,509) (1,269) (1,800) (2,662) (3,120)
Pre-Tax Profit 2,650 3,250 3,177 3,030 3,315
Taxation (847) (1,157) (826) (788) (862)
Minority Interests (86) (107) (133) (150) (169)
Net Profit 1,889 2,200 2,218 2,092 2,284
Cash Flow (IDRb) 2016 2017 2018F 2019F 2020F
Net Working Capital (9,787) (12,884) (18,067) (24,298) (31,635)
Cash Flow from Operations 5,198 6,010 8,347 9,586 11,092
Capex (10,817) (22,128) (21,369) (32,387) (20,406)
Cash Flow from Investing Activities (8,399) (20,384) (21,428) (32,448) (20,468)
Cash Flow from Financing Activities 4,003 17,121 14,224 22,276 8,192
Cash at Beginning of Period 3,323 4,125 6,873 8,016 7,430
Net Change in Cash 802 2,748 1,143 (587) (1,185)
Ending Balance Cash 4,125 6,873 8,016 7,430 6,245
Balance Sheet (IDRb) 2016 2017 2018F 2019F 2020F
Total Cash and Equivalents 4,125 6,873 8,016 7,430 6,245
Tangible Fixed Assets 885 1,036 1,194 1,342 1,479
Intangible Asset 36,899 56,089 76,342 107,306 126,091
Total Assets 53,500 79,193 99,087 125,193 141,489
Interest-bearing Debt 25,020 32,449 44,995 66,550 78,010
Total Liabilities 37,161 60,833 78,323 102,671 117,049
Shareholders' Equity 13,679 15,098 17,304 18,768 20,367
Minority Interests 2,660 3,262 3,461 3,754 4,073
Total Liabilities & Equity 53,500 79,193 99,087 125,193 141,489
Key Metrics 2016 2017 2018F 2019F 2020F
Revenue Growth (%) 15.7 1.0 24.5 13.3 12.4
EPS Growth (%) 28.8 16.5 0.8 -5.7 9.2
Gross Margin (%) 55.0 59.5 57.8 58.0 58.1
EBITDA Margin (%) 56.9 60.1 53.6 55.6 56.2
Net Profit Margin (%) 21.4 24.7 20.0 16.6 16.2
Dividend Payout Ratio (%) 15.5 25.8 30.0 30.0 30.0
Net gearing (%) 1.28 1.39 1.78 2.63 2.94
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 3
Investment Thesis
Indonesia’s leading toll road operator
JSMR has been Indonesia’s leading toll road operator for almost 40 years. It owns 33 toll road concessions, with roads spanning 1,527km in total. It has a 65% market share in terms of commercial toll road length (787.5km) and 80% market share of toll road transaction volumes.
Under the Joko Widodo (Jokowi)-helmed administration, the number of toll road projects in Indonesia has increased. JSMR has reaped the benefits of these multiple government project in recent years. The company has won multiple projects to build and operate toll roads across Indonesia, including road in Java, Sumatra, Kalimantan and Sulawesi. Note that, during the 2015-2019F period, there have been/will be c.1,920km of additional toll roads in Indonesia, roughly half of them developed by JSMR.
The company’s toll road portfolio covers diverse geographic regions. This includes toll roads that provide access to and around most populated regions, such as Jakarta, Surabaya, Semarang, Bali, and Medan. This year, JSMR is commencing operations on new toll roads in Samarinda and Manado. The company is benefiting from increased economic growth in all regions across Indonesia.
Figure 1: JSMR’s market share of operating toll roads Figure 2: JSMR’s market share of transaction volumes
Source: Company data Source: Company data
Key beneficiary of the full connection of the Trans-Java Toll Road
We believe its traffic volume growth will accelerate after the commencement of the full connection of the 933km Merak-Pasuruan Toll Road. The latter is part of the Trans-Java Toll Road. The company said the EBITDA margin of the new toll road is 70-80% higher than its older projects, which are at c.60%.
The Trans-Java Toll Road is one of Indonesia’s large-scale infrastructure projects, connecting most of the big cities in Java. It spans more than 1,167km – starting from Merak in Banten and ending at Banyuwangi in East Java. It is set to improve inter-region connectivity, especially in Java, through land transportation.
It is also estimated that travelling time between cities on the island can be reduced by at least 50%. For example, the travelling time between Merak and Surabaya now takes only 10-15 hours vs more than 20 hours via conventional means, ie non-toll roads.
65%
35%
Jasa Marga's market shares of toll road in operation Others
80%
20%
Jasa Marga's market shares of transaction volume Others
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 4
Figure 3: Trans-Java Toll Road network (Merak-Pasuruan, 933km)
Source: Company, Tribunnews, RHB
Jakarta-Cikampek road should boost earnings further
This elevated toll road is scheduled to commence operations in mid-2019 and should give JSMR the opportunity to adjust its toll road tariffs – this is because customers should face less traffic congestion and benefit from shorter travelling times after this section begins operations. This section is the busiest inter-city toll road in Indonesia, with this 8-laner facilitating c.500,000 vehicles per day in 2018. This huge traffic volume – but limited toll road line – has caused much congestion along the toll road section.
As at early Jan 2019, the construction of the 36km Jakarta-Cikampek elevated road has reached 62%. This elevated toll road should reduce traffic congestion in the Jakarta-Cikampek Toll Road section by separating vehicles between those with long-distance destinations – eg Cirebon, Bandung, Semarang, and Surabaya – and those travelling shorter distances, ie Bekasi and Karawang.
Figure 4: Congested traffic on the Jakarta-Cikampek Toll Road
Figure 5: Jakarta-Cikampek elevated road’s construction
Source: Antara News Source: Tempo.co
Kunciran-Serpong and Serpong-Cinere likely to boost traffic
These toll road sections – which are scheduled to start operations in 2019 – are part of JORR2, which will connect satellite residential cities in Depok, Serpong, Cengkareng, and Tangerang (Soekarno-Hatta International Airport). It will also connect to toll roads owned by other operators to improve connectivity to housing and industrial areas in Cimanggis and Cibitung. We believe this toll road has high potential to see traffic volume growth.
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 5
Figure 6: JSMR’s upcoming projects – JORR2
Source: Company
The next growth driver will be Pandaan-Malang and Gempol Pasuruan, which could begin operations in 2020. These should also boost earnings further. Kontan reported that Waskita Karya (WSKT IJ, NR) is likely to be the contractor to build these toll roads.
Figure 7: JSMR’s upcoming projects in Java
Source: Company
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 6
Capex likely to decline in 2020
Since the construction of JSMR’s major toll roads are almost completed, we expect capex to decline from 2020 onwards. In 2018, the construction of six toll roads – located along the Trans-Java Toll Road – was completed. They have since begun operations.
In 2019, five toll roads in JORR, Medan, Manado, and Samarinda are scheduled for completion. In 2020, there will be only two JSMR toll road sections in the pipeline: Probolinggo-Banyuwangi and Jakarta-South Cikampek (Jati Asih-Sadang). We expect capex to soften to IDR20trn in 2020 from IDR32trn in 2019.
Figure 8: JSMR’s capex (IDRbn)
Source: Company data, RHB
To manage cash flow – in the current stage of aggressive expansion – JSMR manages payments made for the construction of seven toll roads based on contractor pre-financing (CPF) contracts. As project owner, the company will pay construction costs to contractors once the construction process is completed.
Two toll roads concessions are under CPF contracts. They were delivered and started operating at end-2018: Solo-Ngawi and Batang-Semarang. They carried total project contract values of IDR22.4trn.
Toll roads scheduled for delivery in 2019 paid based on CPF contracts: Cengkareng-Kunciran JORR2, Kunciran-Serpong JORR2, Serpong-Cinere JORR2, Balikpapan-Samarinda, and the Jakarta-Cikampek elevated road. These have an estimated total contract value of IDR36.9trn. Other JSMR toll roads slated for deliver this year: Medan-Kualanamu-Tebing Tinggi, Manado-Bitung, and Pandaan-Malang. These are paid monthly, based on actual completion progress.
For toll roads to be delivered in 2020 – Probolinggo-Banyuwangi and Jakarta Cikampek Selatan Section 2 – JSMR said construction is likely to be paid based on CPF contracts.
Figure 9: JSMR toll roads under construction
Source: Company data
3,196 2,123 2,521
7,382
11,691
21,000
32,000
20,000
FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY20F
-00
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Concession Section Contractor Payment Term Length (km) Estimated
Project
Contract
(IDRtrn)
Estimated
Operational
Progress Land
Acquisition
Progress
Construction
Cengkareng-Kunciran JORR2 Section 1 to 4 Wijaya Karya CPF 14.2 5.0 2019 50.03% 21.53%
Kunciran-Serpong JORR2 Section 1 Waskita Karya CPF
Section 2 Adhi Karya - Acset CPF
Serpong-Cinere JORR2 Section 1, 2 Waskita Karya CPF 10.1 2.2 2019 66.99% 45.63%
Medan-Kualanamu-Tebing Tinggi Section 7 PTPP and Adhi Karya Monthly based on actual
progress of completion
61.7 4.1
2019
96.17% 95.52%
Manado-Bitung Section 2A, 2B PTPP Monthly based on actual
progress of completion
39.9 4.7
2019
66.97% 25.75%
Pandaan-Malang Section 1 to 5 PTPP Monthly based on actual
progress of completion
38.5 6.0
2019
70.02% 90.51%
Balikpapan-Samarinda Section 2, 3, 4 Wijaya Karya CPF 99.4 10.0 2019 96.82% 74.86%
Jakarta-Cikampek elevated road Cikunir-Karawang Barat Waskita Karya - Acset CPF 36.4 16.2 2019 N/A 49.43%
Probolinggo-Banyuwangi Section 1 Not been decided CPF 46.1 5.5 2020 N/A N/A
Section 2 Not been decided CPF 59.5 7.1 2020 N/A N/A
Section 3 Not been decided CPF 66.4 8.0 2020 N/A N/A
Jakarta-Cikampek Selatan Section 2 (Jati Asih-Sadang) Not been decided CPF 10.0 1.2 2020 N/A N/A
11.2 3.5 2019 97.29% 69.39%
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 7
Time to benefit from aggressive expansion over the past four years
Since major toll roads to be delivered in 2018 and 2019 – the bulk of which are located within the Trans-Java and JORR networks (areas with high traffic volumes) – we see this year as the time for JSMR to benefit from the aggressive expansion of the last four years. The latter initiative has seen the company’s total toll road length increase more than 80%. As new toll roads become more matured, JSMR should have more room to restructure its assets to make the balance sheet healthier.
Bloomberg reported that Indonesian state investment company Bandha Investasi Indonesia and a foreign partner will allocate USD600m to invest in existing toll roads, according to State-Owned Enterprise Minister Rini Soemarno. The two parties will set aside USD300m each for the investment. The fund is expected to be ready in late Apr 2019. It was indicated that funds will be allocated JSMR and WSKT toll road projects. We believe this will reduce the possibility of the former acquire toll roads from the latter.
Flexibility in funding
JSMR has flexibility and experience in advanced fundraising. On top of taking out conventional bank loans, over the last four years the company has been engaged in the following:
i. Aug 2017 – The Jagorawi Future Revenue-Backed Securities (Kontrak Investasi Kolektif Efek Beragun Aset) issuance that amounted IDR2trn, 5-year term. Notably, Jagorawi’s revenue in 2018-2021F is estimated at IDR4trn, in which half of its future revenue is securitised in this fund raising. JSMR booked proceeds from this as deferred revenue, which is amortised at IDR400bn pa;
ii. Oct 2017 – Subsidiary Marga Lingkar Jakarta’s project bond that amounted to IDR1.5trn, comprising five series bonds (3-12 years terms) with coupons ranging between 7% and 9% pa;
iii. Dec 2017 – A Komodo Bond (IDR-denominated bond listed on the London Stock Exchange) that amounted to IDR4trn with a 3-year term and coupon of 7.5% pa;
iv. Jul 2018 – Mutual Fund Investment Limited Participation (Reksadana Penyertaan Terbatas or “RDPT”), which amounted to IDR3trn with a 5-year term and internal rate of return (IRR) of 10.25% pa. This RDPT includes 20% ownership stake in JSMR subsidiaries Ngawi Kertosono Jaya, Jasamarga Semarang Stem, and Jasamarga Solo Ngawi;
v. Aug 2018 – Divestment of 10% stake in subsidiary Jakarta Lingkar Barat Satu.
These fund-raising exercises have helped JSMR finance its aggressive expansion and manage its debt levels. We expect the company to continue its advanced external funding programme to finance CPF contracts that are due in 2019, as well as bond repayments in 2020. Its matured toll roads – eg Cawang-Tomang-Pluit (Jakarta Inner Ring Road), Soekarno-Hatta International Airport, Jakarta-Tangerang, and Purbaleunyi – are good candidates for asset securitisation.
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 8
Although rising, debts are manageable
We estimate JSMR’s D/E increasing to 3x at end-2019 and 3.2x at end-2020 vs 1.7x at end-2017. However, its debts levels are likely to stay below its covenant, which includes less than 5x D/E and a minimum 1.25x interest coverage ratio.
In our calculation, its interest coverage ratio should be 2.2x and 2.1x for 2019 and 2020.
Figure 10: JSMR’s debt (IDRbn) and interest coverage ratio (x)
Although the debt level could increase in 2019-2020, JSMR should still be able to maintain its interest coverage ratio above its covenant level
JSMR’s interest coverage ratio will start normalising in 2021F onwards, as its debt level should also begin to normalise – this is because it no longer requires high capex from 2021F onwards
Source: Company data, RHB
Valuation
We use 35-year DCF, deriving IDR6,100 per share of FV, which implies 11.7-10.2x FY19F-20F EV/EBITDA. We use a 35-year timeframe to match the average expiry period of the concession rights of each it obtains from the Government. We assume no terminal value, because each toll will be handed back to the Government when the concession period is over.
JSMR is currently trading at 8.8-7.8x 2019F-2020F EV/EBITDA. Our IDR6,100 TP implies 11.7-10.2x FY19-20F EV/EBITDA. We believe this counter deserves to trade at a premium, given its high long-term earnings growth potential.
We note that the company has just finished its aggressive expansion, which extended its toll roads length 80% since 2015. The majority of these roads are to be delivered in 2018 and 2019.
During the early years of operations, the toll road businesses were in the red. However, new toll roads should earn the company high profits after a few years of being in operation. As at 2018, JSMR was in charge of 1,050km of fully-operated toll roads, compared to 578km of fully-operated toll roads as at 2014 – a notable 82% increase in just four years. Moreover, the company targets to add c.323km of fully-operated toll roads in 2019.
13,283 15,921
25,020
32,449
44,995
66,550
78,010
66,954 66,215
2.5 2.5
2.8
3.7
2.8
2.2
2.1
2.6
2.8
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F
(x)(IDRbn)
Debt Interest coverage ratio
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 9
Figure 11: DCF valuation
Source: RHB
Figure 12: WACC breakdown
Source: RHB
2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F
1 2 3 4 5 6 7 8 9 10
(IDRbn)
EBIT 5,730 6,478 6,939 7,368 7,644 7,892 8,188 8,454 8,772 9,058
Tax on EBIT (1,719) (1,943) (2,082) (2,210) (2,293) (2,367) (2,457) (2,536) (2,632) (2,717)
Depreciation and Amortization 1,262 1,471 1,509 1,548 1,589 1,631 1,676 1,722 1,771 1,822
Capital Expenditures (32,387) (20,406) (1,175) (1,203) (1,233) (1,263) (1,295) (1,328) (1,362) (1,397)
Changes in Net Working Capital 6,232 7,337 1,817 (3,079) (2,180) (1,187) 2,573 3,299 4,121 4,067
Free Cash Flow (20,882) (7,064) 7,007 2,423 3,527 4,705 8,686 9,612 10,671 10,832
PV FCF (19,254) (6,005) 5,492 1,751 2,350 2,890 4,919 5,019 5,138 4,809
Sum of PV FCF 81,462
Enterprise value 81,462
Cash @end 2018 8,016
Debt @end 2018 (44,995)
Market Cap 44,484
o/s shares (bn shares) 7.3
Fair Value/share (IDR) 6,129
Implied PE 21.4 19.6
Implied PBV 2.1 1.9
Implied EV/EBITDA 11.7 10.2
WACC BREAKDOWN
% of Debt 70%
% of Equity 30%
Cost of Debt (Kd)
Kd Before Tax 9.0%
Marginal Tax Rate 30.0%
Kd After Tax 6.3%
Cost of Equity (Ke)
Risk free rate 8.0%
Market Risk Premium 5.0%
Beta 0.9
Liquidity Premium 1.0%
Ke 13.5%
WACC 8.5%
TG 2%
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 10
Figure 13: Regional peer comparison I
Source: Bloomberg, RHB
JASA MARGA (PERSERO) TBK PT INDONESIA JSMR IJ PT Jasa Marga (Persero) Tbk. operates the Indonesian
highway system. The Company collects tolls,
maintains the road surfaces, and offers towing and
ambulance services.
INDONESIA PEERS
NUSANTARA INFRASTRUCTURE TBK INDONESIA META IJ EQUITY PT Nusantara Infrastructure Tbk is an investment holding
company. The Company holds subsidiaries engaged in toll
road, sea port, and other infrastructure related business.
REGIONAL PEERS
JIANGSU EXPRESS CO LTD-H CHINA 177 HK EQUITY Jiangsu Expressway Company Limited operates highway
businesses. The Company provides toll highway
investment, construction, and maintenance services.
Jiangsu Expressway also conducts highway passenger
transportation, refueling, catering, car repair, and
advertisement businesses.
SHENZHEN EXPRESSWAY CO LTD-A CHINA 600548 CH EQUITY Shenzhen Expressway Company Limited offers toll
expressway and road construction and investment services.
The Company provides expressway operation,
maintenance, and service station leasing services.
Shenzhen Expressway also conducts real estate
development, advertising, and engineering consulting
businesses.
SICHUAN EXPRESSWAY CO-H CHINA 107 HK EQUITY Sichuan Expressway Company Limited offers expressway
investment and construction services. The Company builds
toll highway, bridge, tunnel, and other traffic projects.
Sichuan Expressway also conducts city operation, energy,
media, energy, and financial investment businesses.
YUEXIU TRANSPORT INFRASTRUCT HONG KONG 1052 HK EQUITY Yuexiu Transport Infrastructure Ltd., through its
subsidiaries, invests in, develops, operates, and manages
toll highways, expressways, and bridges in China.
ANHUI EXPRESSWAY CO LTD-H CHINA 995 HK EQUITY Anhui Expressway Co. Ltd. principally holds, operates and
develops toll expressways and highways in Anhui province
in China.
GAMUDA BHD MALAYSIA GAM MK EQUITY Gamuda Berhad is an investment holding and civil
engineering construction company. Through its
subsidiaries, the Company provides earthwork construction,
manufactures and supplies road surfacing materials, and
operates quarry and road laying projects. Gamuda also has
operation in hiring and rental of plant and machinery,
develops properties, and manufactures and sells paper.
LINGKARAN TRANS KOTA HLDGS MALAYSIA LTK MK EQUITY Lingkaran Trans Kota Holdings Berhad is an investment
holding company. The Company, through its subsidiaries,
designs and constructs Lebuh Raya Damansara-Puchong
and manages toll operations. The Company also provides
highway maintenance services.
Company Name Country of Origin Bloomberg Ticker Company Description
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 11
Figure 14: Regional peer comparison II
Source: Bloomberg, RHB
Figure 15: JSMR’s 5-year rolling forward EV/EBITDA
JSMR is currently trading at 8.8x FY19F EV/EBITDA, -1.2SD below its 5-year mean
Source: RHB
Figure 16: JSMR’s 5-year rolling forward P/E
JSMR is currently trading at 17.4x FY19F P/E, -0.8SD below its 5-year mean
Source: RHB
EPS growth
(%)
PER
(x)
PEG
(x)
EV/EBITDA
(x)
PBV
(x)
ROE
(%)
Dividend
yield (%)
EPS growth
(%)
PER
(x)
PEG
(x)
EV/EBITDA
(x)
PBV
(x)
ROE
(%)
Dividend
yield (%)
JASA MARGA (PERSERO) TBK PT 4,820 2,475 (6.7) 17.1 (2.6) 8.9 1.6 9.5 1.8 9.1 15.7 1.7 7.8 1.5 9.6 1.9
INDONESIA PEERS
NUSANTARA INFRASTRUCTURE TBK 212 266 (54.6) 42.9 (0.8) 16.6 0.8 2.0 0.5 20.0 35.8 1.8 12.9 0.8 2.9 0.5
REGIONAL PEERS
JIANGSU EXPRESS CO LTD-H 11 7,337 (0.8) 11.5 (13.9) 9.2 1.8 15.8 5.1 2.1 11.3 5.3 8.9 1.7 15.0 5.1
SHENZHEN EXPRESSWAY CO LTD-A 9 2,730 (26.8) 9.8 (0.4) 7.6 1.2 12.4 5.1 12.1 8.7 0.7 7.0 1.1 12.8 5.0
SICHUAN EXPRESSWAY CO-H 3 1,428 6.7 6.8 1.0 7.7 0.4 6.2 5.1 3.1 6.6 2.1 7.6 0.4 6.1 5.1
YUEXIU TRANSPORT INFRASTRUCT 6 1,278 9.2 7.3 0.8 6.2 0.7 10.2 6.8 7.7 6.7 0.9 5.9 0.7 10.4 7.2
ANHUI EXPRESSWAY CO LTD-H 5 1,275 0.7 6.2 8.4 3.5 0.6 10.7 5.6 (16.2) 7.4 (0.5) 3.5 0.6 8.4 4.7
GAMUDA BHD 3 1,641 14.3 10.8 0.8 13.3 0.9 8.1 4.2 6.4 10.1 1.6 12.6 0.8 8.1 4.3
LINGKARAN TRANS KOTA HLDGS 4 576 7.6 9.3 1.2 6.0 N/A 23.3 6.0 4.9 8.8 1.8 6.0 #N/A N/A 21.3 6.2
19,006 (3.2) 11.3 (5.0) 8.6 1.3 12.4 4.7 4.4 10.7 2.8 8.1 1.2 12.0 4.7
2020F
Company NamePrice
(Local crc)
Market cap
(USDm)
2019F
Jasa Marga Indonesia Initiating Coverage
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Scenario analysis
We use traffic volume growth as the key driver in our scenario analysis. For our base case, traffic volume should grow 13% YoY for new toll roads and 1% YoY for mature toll roads.
Figure 17: Scenario analysis
Traffic volume for new tolls
Traffic volume for new tolls
Traffic volume in 2019F-2021F (m units)
Net earnings in 2019F-2021F (IDRbn)
FV/share (IDR)
Base scenario +1% YoY +13% YoY 1,135-1,178 2,092-2,939 6,100
Best scenario +2% YoY +21% YoY 1,145-1,212 2,122-3,143 7,700
Worst scenario +0% YoY +5% YoY 1,126-1,145 2,062-2,753 4,800
Source: RHB
For the best-case scenario, we assume traffic volume growing 21% YoY for the new toll roads and 2% YoY for mature ones. Our 35-year DCF derived IDR7,700 per share in FV implies 13.3-11.4x FY19F-20F EV/EBITDA.
For the worst-case scenario, we assume traffic volume to grow 5% YoY for the new toll roads and 0% YoY for the mature ones. Our 35-year DCF derived IDR4,800 per share in FV implies 10.3-9.3x FY19-20F EV/EBITDA.
Risks
Risks to our call include:
i. Risks arising from the land acquisition process;
ii. Risks associated with toll road construction projects;
iii. Change in government regulations;
iv. Significant cash outflows to provide bridge financing for land acquisitions to the Government;
v. Major expansion programme could make investments, acquisitions, divestitures or other corporate actions in future involve considerable risks;
vi. Revenue and earnings are affected by applicable toll tariffs and revisions to such tariffs.
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Historical & Financial Forecasts
Figure 18: JSMR’s revenue forecasts
3-year revenue CAGR is at 7.3% for 2014-2017
We expect revenue to grow at a 3-year CAGR of 16.6% in 2017-2020, backed by more toll roads starting operations from 2018 onwards
Source: Company data, RHB
Figure 19: JSMR’s toll revenue breakdown (9M18)
JSMR’s toll revenue as at 9M18 mainly comes from the Purbaleunyi section (15.5%), comprising the Cikampek-Padalarang and Padalarang-Cileunyi, Jakarta-Cikampek (13%), Jakarta-Tangerang (9.5%), and Jakarta-Bogor (9.1%) stretches
Toll subsidiaries notably contributed 13.8% of the company’s 9M18 total toll revenues
Source: Company data, RHB
7,228 7,631
8,832 8,922
11,105
12,577
14,140
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
2014 2015 2016 2017 2018F 2019F 2020F
(IDRbn)
CAGR 2017-20F= 16.6%
CAGR 2014-17= 7.3%
Jakarta - Bogor - Ciawi, 9.1%
Jakarta -Cikampek,
13.0%
Jakarta -Tangerang,
9.5%
Cawang -Tomang - Pluit,
10.4%
Purbaleunyi, 15.5%
Palimanan -Kanci, 2.2%
Semarang Seksi A,B,C, 1.7%
Surabaya -Gempol, 4.9%
Belawan -Medan -Tanjung
Morawa, 1.7%
JORR, 18.1%
Subsidiaries, 13.8%
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Figure 20: JSMR’s EBITDA forecasts
JSMR’s 3-year EBITDA CAGR is at 11.3% for 2014-2017
We expect its 3-year EBITDA CAGR at 14% for 2017-2020F
EBITDA margins have been higher than 50% since 2014. It peaked at 60% in 2017 from gains on divestments recorded in its operating income
In 2018F, JSMR’s EBITDA margin could narrow, as new toll roads began operations that year. Nascent roads require new opex, while the tariff is at a low, introductory rate. That said, we expect EBITDA margins to normalise from 2019 onwards
Source: Company data, RHB
Figure 21: JSMR’s net profit forecasts
Earnings have has been growing steadily at a 3-year CAGR of 15% in 2014-2017
We see slower earnings growth, ie at a CAGR of 7.5% in 2017-2025F, driven by higher financing costs from increased debt levels. However, earnings growth should accelerate from 2025F onwards, in line with the growing number of matured toll roads
We also forecast net margin to normalise in 2021F onwards, following the normalisation of debt levels and finance costs from that period onwards
Source: Company data, RHB
3,889 4,192
5,025 5,361
5,956
6,992
7,949
53.8%
54.9%
56.9%
60.1%
53.6%
55.6%
56.2%
53.0%
54.0%
55.0%
56.0%
57.0%
58.0%
59.0%
60.0%
61.0%
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2014 2015 2016 2017 2018F 2019F 2020F
(IDRbn)
EBITDA EBITDA Margin
1,422 1,466
1,889
2,200 2,218 2,092
2,284
2,939
3,266
3,503 3,692
3,936
19.7%
19.2%
21.4%
24.7%
20.0%
16.6%16.2%
19.5%
20.5%
21.3%21.8%
22.6%
15.0%
17.0%
19.0%
21.0%
23.0%
25.0%
27.0%
1,200
1,700
2,200
2,700
3,200
3,700
4,200
2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
(IDRbn)
Net Profit Net Margin
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Figure 22: JSMR’s DuPont analysis in 2019F
We expect JSMR to generate 9.3% in 2019F ROE, backed by strong financial leverage
The company’s largest asset is its intangible assets (concession rights) and other receivables (receivables the Government will pay to the company for land acquisition costs)
Source: RHB
9.3%
5.6
0.1
16.6%
0% 100% 200% 300% 400% 500% 600%
ROE
Financial Leverage
Asset Turnover
Net Margin
x
x
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Company Background JSMR was established in 1978 to support Indonesia’s development by building the country’s road networks. Initially, its main responsibilities were to plan, build, operate, and maintain toll roads and their facilities. Until 1987, the company was the only toll road operator in Indonesia. In 2004, with the establishment of Indonesian Toll Road Authority, the Government took over the authority role over such ventures.
Today, JSMR functions fully as a toll road operator and developer. It is the largest toll road operator in Indonesia, and runs operations in Sumatera, Java, Kalimantan, Bali, and Sulawesi.
Figure 23: Shareholding structure
Source: Company data, RHB
JSMR remains consistent in expanding its business, as well as integrating new businesses and projects into its portfolio. The company also operates in a highly-regulated and capital-intensive industry that creates a high barrier of entry into the domestic toll road market. In addition, the payback period for a typical toll road investment ranges between five and 20 years. Toll road operators generally book negative cash flows during the first 10 years of operations.
Being majority-owned by the Government, JSMR has strong support in developing the toll road infrastructure in Indonesia, such as:
i. Being awarded – at no cost – 13 initial toll road concessions in 2004;
ii. Implementing reforms in land procurement regulations that places the responsibility of land acquisition – required for the construction of new toll road projects – on the Government;
iii. Classification of new toll roads under construction as national strategic projects.
JSMR’s toll road portfolio covers diverse geographic regions, including toll roads providing access to and around most populated regions. This includes Jakarta, Surabaya, Semarang, Bali, and Medan. This year, the company is to commence on new toll roads in Samarinda and Manado. It is also benefiting from increased economic growth in all regions across Indonesia.
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Figure 24: JSMR’s toll roads portfolio
Source: Company data, RHB
Under Jokowi’s administration, the number of government toll road projects has increased. JSMR has benefited from this, with multiple government projects operated under its management in recent years. The company has also won multiple projects to build and operate toll roads across Indonesia – most in densely-populated areas in Java, Bali, Sumatra, Kalimantan, and Sulawesi.
Concession Length (km) Operator Ownership
Jagorawi 59.0 Jagorawi Branch 99.90%
Jakarta-Tangerang 33.0 Cawang-Tangerang-Cengkareng Branch 99.90%
Prof.Dr.Ir. Sedyatmo 14.3 Cawang-Tangerang-Cengkareng Branch 99.90%
Jakarta Inner Ring Road 23.6 Cawang-Tangerang-Cengkareng Branch 99.90%
Jakarta-Cikampek 83.0 Jakarta-Cikampek Branch 99.90%
Padaleunyi 64.4 Purbaleunyi Branch 99.90%
Cipularang 58.5 Purbaleunyi Branch 99.90%
Palikanci 26.3 Palikanci Branch 99.90%
Semarang 24.8 Semarang Branch 99.90%
Surabaya-Gempol 49.0 Surabaya-Gempol Branch 99.90%
Belmera 42.7 Belmera Branch 99.90%
Jakarta Inner Ring Road 28.3 PT Jalan Tol Lingkar Luar Jakarta 99.90%
Ulujami-Pondok Aren 5.6 PT Jalan Tol Lingkar Luar Jakarta 99.90%
JORR W2 Utara 7.7 PT Marga Lingkar Luar Jakarta 65.00%
Bogor Outer Ring Road 12.0 PT Marga Sarana Jabar 55.00%
Cengkareng-Kunciran 14.2 PT Jasamarga Kunciran Cengkareng 76.20%
Kunciran-Serpong 11.2 PT Marga Trans Nusantara 60.00%
Semarang-Solo 72.6 PT Trans Marga Jateng 58.91%
Surabaya-Mojokerto 36.3 PT Jasamarga Surabaya Mojokerto 55.50%
Gempol-Pasuruan 34.2 PT Jasamarga Gempol Pasuruan 98.80%
Gempol-Pandaan 13.6 PT Jasamarga Pandaan Tol 92.20%
Nusa Dua-Ngurah Rai-Benoa 9.7 PT Jasamarga Bali Tol 55.00%
Medan-Kualanamu-Tebing Tinggi 61.7 PT Jasa Marga Kualanamu Tol 55.00%
Solo-Ngawi 90.4 PT Jasamarga Solo Ngawi 40.00%
Ngawi-Kertosono 87.0 PT Ngawi Kertosono Jaya 40.00%
Cinere-Serpong 10.1 PT Cinere Serpong Jaya 55.00%
Batang-Semarang 75.0 PT Jasamarga Semarang Batang 40.00%
Balikpapan-Samarinda 99.4 PT Jasamarga Balikpapan Samarinda 59.00%
Manado-Bitung 39.9 PT Jasamarga Manado Bitung 65.00%
Pandaan-Malang 37.6 PT Jasamarga Pandaan Malang 60.00%
Jakarta-Cikampek II Elevated 36.4 PT Jasamarga Jalanlayang Cikampek 80.00%
Probolinggo-Banyuwangi 172.9 PT Jasamarga Probolinggo 94.80%
Jakarta-Cikampek II South 64.0 PT Jasamarga Japek Selatan 80.00%
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Figure 25: JSMR’s milestones
Year Description
1978 JSMR was established. Its business was in managing providing maintenance and procurement services related to the toll road network. It began operating Jagorawi, the first toll road in Indonesia.
1983 Semarang toll road kicked off operations.
1984 Jakarta-Tangerang toll road began operations, as well as the Dr Ir Sedyatmo Toll Road (airport toll road).
1986 Surabaya-Gempol toll road began operating, as well as Belmera (Belawan-Medan Tanjung Morawa).
1987 The Government opened up opportunities to the private sector to participate in toll road developments through the build, operate and transfer (BOT) system. JSMR began managing operations at the Jakarta Inner City Toll Road (Jakarta Inner Ring Road), in stages.
1988 Jakarta-Cikampek toll road began operations.
1990 Padaleunyi (Padalarang-Cileunyi) toll road commence operating.
1991 Jakarta Outer Ring Road (JORR) - Section S Pondok Pinang Lenteng Agung toll road kicked off operations.
1998 Palikanci (Palimanan-Kanci) toll road began operations.
2002 Jalan Tol Lingkar Luar Jakarta (JLJ) was established.
2003 Cipularang (Cikampek-Purwakarta-Padalarang) toll road began operating.
2004 Role of regulating authority was returned to the Government (Department of Public Works, ie Toll Road Regulatory Agency/ BPJT).
2006 The signing of toll road concession agreements (PPJT) for Bogor Outer Ring Road, PPJT Semarang-Solo, PPJT Gempol-Pasuruan, PPJT Gempol Pandaan, PPJT JORR W2 North, PPJT Surabaya-Mojokerto, and other 13 toll roads operated by the company
2007 JSMR changes its logo to better illustrate its focus on modernisation and transformation. It was also listed on the Indonesia Stock Exchange. In the same year, the JORR toll road was integrated with the Ulujami-Cilincing road.
2008 Signing of the Kunciran-Serpong PPJT.
2009 Operations kick off at the Bogor Outer Ring Road Toll Road (Section 1 Sentul South-Kedung Halang Toll Road); implementation of e-Toll Card, signing of Cengkareng-Kunciran PPJT, and acquisition of Surabaya-Mojokerto Toll Road.
2010 Acquisition of Jasamarga Tollroad Maintenance (previously Jasa Layanan Pemeliharaan).
2011 Operations begin at Surabaya-Mojokerto and Semarang-Solo toll roads. Also, the Nusa Dua-Ngurah Rai-Benoa PPJT is signed.
2012 Implementation of e-Toll Pass
2013 Operation of Nusa Dua-Ngurah RaiBenoa Toll Road (Toll Road Mandara) and JORR W2 North Toll Road (Kebon Jeruk Ciledug Section); establishment of Jasamarga Property
2014 Operation of Semarang-Solo Toll Road (Section 2 of Ungaran Bawen Toll Road), Bogor Outer Ring Road Toll Road (Section 2A Kedung Halang-Kedung Badak), and JORR W2 North Toll Road (Ciledug-Ulujami Section). JSMR wins the tender for the concession rights to manage the Medan-Kualanamu-Tebing Tinggi Toll Road. Also, the PPJT for the Surabaya-Madura Toll Bridge Operation is signed.
2015 Acquisition of Solo-Ngawi, Ngawi-Kertosono, and Cinere-Serpong toll roads. Operations begin at the Gempol-Pandaan toll road. The company also establishes Jasamarga Tollroad Operator (previously Jasa Layanan Operasi).
2016 Operation of Surabaya-Mojokerto Section 4 of Krian-Mojokerto Section. JSMR wins the concession for the Batang-Semarang, Balikpapan-Samarinda, Manado-Bitung, Pandaan-Malang, and Jakarta-Cikampek II elevated toll roads. In the same year, toll road transaction systems from Jakarta to Brebes are integrated.
2017 Operation of Semarang-Solo toll road (section of Bawen-Salatiga), Medan-Kualanamu-Tebing Tinggi toll road (section of Kualanamu-Sei Rampah), Gempol-Pasuruan toll road (section of Gempol-Rembang), Surabaya-Mojokerto toll road (section of Sepanjang-Krian). JSMR wins the concession and signs the PPJT for Probolinggo-Banyuwangi (172.9 km) and Jakarta-Cikampek II South (64 km) toll roads, ie projects initiated by the company. The operation of toll roads using non-cash transactions, in line with the Government’s national non-cash programme, is fully implemented. JSMR also issues Bond I Marga Lingkar Jakarta of 2017, a bond issued at the project level/JSMR subsidiary Marga Lingkar Jakarta (Project Bond) for JORR W2 North Toll Road (Kebon Jeruk-Ulujami). Also achieves securitisation of Jagorawi Toll Revenues through a public offering of collective investment contract (KIK) of asset-backed securities (EBA) Mandiri JSMR01. Issuance of IDR Global Bond under the name Komodo Bond on the London Stock Exchange.
Source: Company, RHB
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Figure 26: Board of directors
Name Position Description
Desi Aryani
President director Desi Aryani has been the company's president director since 29 Aug 2016. Previously, she was the director of operations I at PT Waskita Karya (2013-2016) and director of operations II in the same company from 2011 to 2012. She has a Bachelor's degree in Civil Engineering from University of Indonesia and Master's degree in Management from Prasetya Mulya.
Donny Arsal
Director of finance Donny Arsal has been appointed as JSMR's director of finance since 15 Mar 2017. Previously, he served as the director-head of investment banking at PT Mandiri Sekuritas (2010-2017), and associate director from 2004 to 2010. Prior to that, he was an assistant vice president at PT Mandiri Sekuritas (2003). He obtained a Bachelor in Economics from University of Indonesia.
Mohammad Sofyan
Director of operation I Mohammad Sofyan has been appointed as director of operation I since 15 March 2017. Previously, he served as the corporate secretary (2015-2017), vice-president of corporate planning (2012-2015), head of monitoring and evaluation of the Corporate Work Programme at the Corporate Planning Bureau (2010-2012), and head of technology development (analysis of corporate information) at the technology bureau (2008-2010) in the company. He has a Bachelor's degree in civil engineering from Ten November Institute of Technology Surabaya, Master's in Project Management from University of Indonesia and Masters of business studies and information technology from the University of Melbourne.
Subakti Syukur
Director of operation II Subakti Syukur has been the company's director of operation II since 29 Aug 2016. Previously, he was the president director of Marga Lingkar Jakarta (2014-2016), general manager of the Tomang-Cengkareng branch (2005-2006 and 2008-2014) and head of the Surabaya-Gempol branch (2006-2008). He has a Bachelor's of Civil Engineering from Bandung Institute of Technology and Master's degree in management from Indonesia Christian University.
Adrian Priohutomo
Director of development Adrian Priohutomo was appointed as the director of development in 2018. Previously, he served as the chairman of Permata Graha Nusantara (2014-2018). He obtained a Bachelor's Degree in planology engineering from Bandung Institute of Technology.
Alex Denni
Director of human resources & general affairs
Alex Denni has been director of human resources and general affairs since 5 Sep 2018. Previously, he served as chief human capital officer at Bank Negara Indonesia (2014-2018) dan chief learning officer & head of corporate at University Bank Mandiri. He has a Bachelor's degree in agro-industry management from Bogor Agricultural University, Master's degree in Management from Atma Jaya University and PhD in human capital from Bogor Agricultural University
Source: Company, RHB
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Figure 27: Board of commissioners
Name Position Description
Sapto Amal Damandari
President commissioner/independent
Sapto Amal Damandari has been JSMR's president commissioner since 5 Sep 2018. Currently, he also the president commissioner of PT Pelabuhan Indonesia I. Previously, he served as vice chairman of the Audit Board of the Republic of Indonesia (2014-2017). He has a Bachelor of Economics degree from University of Gajah Mada.
Agus Suharyono
Commissioner Agus Suharyono has been appointed as commissioner since 31 Dec 2016. Currently, he also serves as the assistant deputy for Energy, Logistics, Regions, and Tourism II, under the Ministry of State-Owned Enterprises. Previously, he served as a commissioner Pelabuhan Indonesia II (2014-2016), and Hotel Indonesia Natour (2000-2003). He has a Bachelor's degree from Brawijaya University and a Master's in Agricultural Economics from the University of Maine.
Anita Firmanti Eko Susetyowati
Commissioner Anita Firmanti Eko Susetyowati has been appointed as a commissioner of the company since 5 Sep 2018. She has a Bachelor's degree in forestry from Bogor Agricultural University and a Master's in Technology from Bandung Institute of Technology.
Vincentius Sonny Loho
Independent commissioner Vincentius Sonny Loho has been appointed as a commissioner since 10 Apr 2018. Previously, he served as a director-general in the Ministry of Finance. He has a Bachelor's degree from Sekolah Tinggi Akutansi Negara (STAN) and a Master's of Public Management from Carnegie Mellon University.
Sugiharjo
Commissioner Sugiharjo has been appointed as a commissioner since 15 Mar 2017. Currently, he also serves as the general secretary of the Ministry of Transportation. Previously, he served as expert staff on logistics and multi-modes in the Ministry of Transportation (2014-2015) and was the director of traffic and transportation in the same ministry (2012-2014). He has a Bachelor's degree in civil engineering from the University of Indonesia and Masters in public policy administration from University of Indonesia.
Muhammad Sapta Murti
Commissioner Muhammad Sapta Murti has been appointed as commissioner since 30 Mar 2016. Currently, he also serves as a deputy official in law and legislation, in the Ministry of State Secretariat. He is also a non-permanent lecturer at the Trisakti University's law faculty, as well as the University of Indonesia and Pelita Harapan University law faculty (post-graduate). Previously, he was a member of the board of commissioners at Asuransi Jiwasraya (2008-2016). He has a Bachelor's degree in Civil/Agrarian Law from Trisakti University, a Master of Arts majoring in rural development from Reading University, Master of Notary from University of Indonesia and PhD in Law Science from Padjadjaran University.
Source: Company, RHB
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Industry Outlook
Growing toll road construction in Indonesia
Toll road construction has increased significantly in the past few years, supported by a government that prioritises toll roads as a national strategic project. In the last five years, the Government’s budget for infrastructure has been increased – it is still growing in 2019. The total budget for 2019 for infrastructure is IDR145trn, which marks a 1.1% increase from 2018’s IDR410.4trn.
Over the last four years, 947km of toll roads have been built. The Government invested IDR10.5trn in Hutama Karya for its major toll road in Sumatra. It also assumed responsibility for the development of Indonesian toll roads and announced its intention to invite state-owned and private owned companies to participate in the construction and operation of concession toll roads.
Figure 28: The Government’s many roles in toll road development
Source: Company
Based on the toll operator project schedule, the 2018 and 2019 operational years are a time for major new toll roads to be delivered. In our calculation, the total length of new total roads to commence operations stand at 886km in 2018 and 639km in 2019. These new toll roads mainly related to the Trans-Java and JORR network.
Another massive new toll road delivery is scheduled for 2025, with a total length of 853km – the bulk is related to the Trans-Sumatra toll road, which is mainly being built by Hutama Karya.
Figure 29: Indonesia toll road length (km) Figure 30: Toll roads starting operations each year (km)
Source: Company data, RHB Source: Company data, RHB
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1978 1984 1987 1990 1996 1999 2003 2009 2011 2014 2016 2018 2020 2025
(km)
5925 47 43 24
83 7928
7232
7 659
24 1245 47
1034
132
5
258
886
639
131
242
853
0
100
200
300
400
500
600
700
800
900
1000
1978
1983
1984
1986
1987
1988
1990
1991
1996
1998
1999
2001
2003
2008
2009
2010
2011
2013
2014
2015
2016
2017
2018
2019
2020
2022
2025
(km)
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JSMR has the largest toll road concession, with a total length of 1,498km. This is followed by Hutama Karya and WSKT. JSMR”s toll road concessions are mainly located in Java, in regions with high traffic volumes. Hutama Karya’s toll road concessions are mainly located in Sumatra.
In terms of toll roads in operation, JSMR also has the largest portfolio – with a total length of 1,050km. This is followed by WSKT (544km) and Astra Infrastructure (303km).
Figure 31: Toll road concessions – by company (km) Figure 32: Operational toll roads – by company
Source: Company data, RHB Source: Company data, RHB
We believe 2019 is a year worth watching, as the Apr 2019 presidential election is looming. As mentioned earlier, the toll road business may benefit from government support. However, there are also risks, as there is no assurance that the Government will control and provide influence in a way that benefits such road operators. As infrastructure development is a major priority, the Government may request these companies – for social welfare and policy reasons – to construct additional toll roads that may not be financially feasible.
Toll roads reduce transportation cost and shorter travelling time
Based on our analysis, travellers can save up to 60% of their Jakarta-Surabaya travel costs if they opt to use the Trans-Java Toll Road. This is assuming estimated costs for tariff roads and petrol are IDR1,100,000 per trip. The cost can decrease if there are more people in a car – it can go as low as IDR183,000 per person, with six in a vehicle (Figure 34).
We see this is as positive for tourism and travel transportation – as travellers can use mini-buses and similar vehicles – which can accommodate up to 12 people. Other than cost savings, travellers can also save up to 7.5 hours of travel time compared to the normal Pantura (North Shore) route, due to the toll roads having less traffic and better road quality.
According to the latest policy announced by the Ministry of Public Works & Public Housing on 14 Jan 2019, estimated toll-road tariffs for Jakarta to Surabaya range between IDR580,000 and IDR1,390,000, depending on classification of vehicles. This translates to an average tariff per km of IDR748 to IDR1,640 per km. The second classification (truck with two axles) is more expensive, approximately 50% more than the first (ie sedans, jeeps, pick-ups/small trucks, and buses). The fifth classification (truck with five axles) is cheaper than our first estimate prior to the announcement of the IDR1,520,000 tariff, which seen to be positive, ie the Government is supportive of logistics costs along the Trans-Java route.
34
132
210
354
967
1,374
1,498
0
200
400
600
800
1000
1200
1400
1600
NusantaraInfrastructure
Citra MargaNusaphala
Persada
Wijaya Karya Astra Infra WaskitaKarya
HutamaKarya
Jasamarga
(km)
3472 57
303
544
206
1,050
0
200
400
600
800
1000
1200
NusantaraInfrastructure
Citra MargaNusaphala
Persada
Wijaya Karya Astra Infra Waskita Karya Hutama Karya Jasamarga
(km)
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 23
Figure 33: Breakdown of Jakarta-Surabaya toll road tariffs
Source: Company data, Tribunnews, RHB
Figure 34: Comparison costs of several transportation options for Jakarta-Surabaya routes
Note: Cost for cars includes tariff toll road and petrol costs, assuming c.65 litres at IDR7,650 per litre
Source: RHB
Jakarta - Surabaya Distance (km) Class I Class II Class III Class IV Class VJakarta - Cikampek 72.00 15,000 23,500 30,000 37,000 44,000 Cikopo - Palimanan 116.75 102,000 153,000 204,000 255,000 306,000 Palimanan - Kanci 26.00 12,000 15,000 21,000 27,000 32,000 Kanci - Pejagan 35.00 29,000 43,500 43,000 58,000 58,000 Pejagan - Pemalang 57.50 57,000 86,500 86,500 115,000 115,000 Pemalang - Batang 39.19 39,000 59,000 59,000 78,500 78,500 Batang - Semarang 75.00 75,000 112,500 112,500 150,000 150,000 Semarang - Solo 72.64 33,000 49,500 58,000 75,000 84,000 Solo - Ngawi 90.43 86,500 129,500 129,500 173,000 173,000 Ngawi - Kertosono - Kediri 117.40 52,000 78,000 78,000 104,000 104,000 Jombang - Mojokerto 40.50 46,000 69,000 92,000 115,000 138,000 Mojokerto - Surabaya 36.27 36,000 53,500 71,500 89,500 107,500 Subtotal 778.68 582,500 872,500 985,000 1,277,000 1,390,000
Remarks: Class I Sedan, jeep, pick-up/ small truck and busClass II Truck with two axles Class III Truck with three axles Class IV Truck with four axles Class V Truck with five axles
Toll-road Tariffs (IDR)
183,333 200,000
250,000 275,000
430,000
550,000
730,000
1,100,000
11.0 11.5
18.0
11.0
9.5
11.0
3.5 3.5
0
2
4
6
8
10
12
14
16
18
20
100,000
300,000
500,000
700,000
900,000
1,100,000
1,300,000
CarTrans Jawa routes
(6 people)
TrainEconomy class
BusPantura routes
CarTrans Jawa routes
(4 people)
TrainExecutive class
CarTrans Jawa routes
(2 people)
AirplanesBudget airline
AirplanesFull-service airline
Length (hour) Prices (IDR)
Estimate cost (IDR) Travel time (hour)
Jasa Marga Indonesia Initiating Coverage
6 February 2019 Infrastructure | Toll Road
See important disclosures at the end of this report 24
Competition with other infrastructure modes
The toll road business faces competition from non-road modes of transportation, such as railways and alternative road networks. The Government is developing a railway line – commonly known as the Light Rail Transit (LRT) – that connects Cawang to Cibubur, East Bekasi, and Dukuh Atas. This is expected to commence operations in 2019.
Certain sections of the LRT will run parallel to the Jagorawi and Jakarta-Cikampek toll roads, and may also compete with the Cawang-Tomang-Pluit toll road for access into Central Jakarta. In addition, the Government is developing a railway connecting Jakarta and Bandung, which is expected to commence operations in 2020 – this may compete with the Jakarta-Cikampek and Cikampek-Padalarang Toll Roads.
Figure 35: Indonesian railway passenger trends
Source: Source: CEIC data
However, we do not believe that the above alternative modes of transportation pose a material threat to the toll roads business. This is because we think the majority of travellers prefer to drive their own vehicles due to the greater convenience and privacy.
In addition, traveling by train requires the traveller to tailor his/her schedule to meet pre-set departure times, as well as arrange for other modes of transportation to travel to and from the train stations from their departure points and ultimate destinations.
203 199 202 216
278
326352
393
-5
0
5
10
15
20
25
30
0
50
100
150
200
250
300
350
400
450
2010 2011 2012 2013 2014 2015 2016 2017
Railway Passengers (LHS) Growth (RHS)(Unit m) (%)
25
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