IP JSMR: More Tailwinds Ahead
Thursday, February 20, 2020       10:03 WIB

 Company Update  /  IJ   /     Click here for full PDF version  
Author: Timothy Handerson
  • Japek-Elevated II tariff will be implemented in Mar20, a delay though we have taken this into our calculation (10mn traffic vs. target 11-14mn).
  • Implementation of blended tariff may raise Jakarta-Cikampek overall tariff by 75-80%, which translates to 5%/13% EBITDA/EPS upside in 2020.
  • We see an imminent drop in interest costs along with normalizing capex beyond 2020. Maintain Buy on .

A delay to Japek Elevated II operations, though we have expected this
Our checks suggest that the handover of Japek Elevated II will be done in 1Q20 at the latest, a delay from initial plan of Jan20. Nonetheless, we already pencil in a conservative Japek-Elevated II traffic of 10m in 2020 vs. its target of 11-14mn (after taking into account the delay).
Expect positive EPS impact from implementation of blended tariffs
We found that plans to implement a blended tariff system (i.e. Japek Elevated II tariff will be equivalent to the tariff for Jakarta-Cikampek section), which suggests a higher tariff for the non-elevated Jakarta-Cikampek section (as non-elevated sections will also benefit from lower congestion post operation of Japek Elevated II). Based on our estimate, this could translate to a pricing of Rp30k/car, implying a 75-80% increase on existing tariff for Jakarta-Cikampek section (now at c.Rp17k with estimated annual traffic of c.45m cars) - we think this provides an EBITDA/EPS upside of 5%/13% in 2020 and 4%/10% in 2021, all else equal.
Prudent funding strategy shall translate to lower interest costs
Some of its funding initiatives in the short term (1H20) are: 1) JORR non-S securitization (into KIK Dinfra with proceed target of Rp2tr and indicative rate of 8.75%) and 2) re-profiling the loan for Ngurah Rai toll road (i.e. lower cost of funds on the loan to 6-7% from c.9% now) - both shall be value accretive for as it remains lower than current cost of fund of c.9.3% as of Sep19.
Foreign ownership at its lowest amid unfound concern on high capex
Foreign ownership has declined to an all-time low of 0.2% in Jan20 vs. peak of 1.0% in 2014 due to concern on heavy capex in the last few years (Fig 8). Our checks confirmed that capex trajectory beyond 2020 shall trend down (Rp20-25tr in 2020/Rp5-10tr in 2021) as construction of ProbolinggoBanyuwangi will be done gradually, alleviating capex pressure.
Re-iterate our Buy call, valuations on its side
We re-iterate our Buy call with a DCF-based ( WACC : 11.2%) TP of Rp7,100 - the stock has dropped 3.4% YTD, now trading at 8.5x 2020F EV/EBITDA (vs.10-year average of 11x). Risk is further delay on Japek Elevated II.


Sumber : IPS