Jasa Marga (JSMR IJ, Rp3,100 BUY) Eyeing new opportunit­ies - Danareksa

Government to re-evaluate 24 toll road concessions
To speed up toll road development, the government has appointed the National Development Planning Agency (Bappenas) to re-evaluate 24 toll roads whose development has not shown any significant progress. The study will look at both the feasibility of the projects and the financial strength of the investors and is expected to be completed by March 2011. If the concession holders have not reached financial closure by that time, the concession will be revoked by the government and re-tendered. So far, only two toll road operators have been able to deliver - Jasa Marga and Bakrieland. Other investors, including foreign names such as Thiess, have failed to make any real progress. It has been indicated by the Toll Road Authority Body (BPJT) that investment costs have risen to Rp111.7tn from the previously estimated Rp77tn.

Looking at new sections
Jasa Marga has seven new sections in its development portfolio. However, during our last visit to the company, Jasa Marga indicated that it was eyeing several other sections which are strategic to its portfolio, including the sections under re-evaluation. The undeveloped Cikampek Palimanan section - part of the Trans Java toll road - could, for instance, be easily integrated into Jasa Marga’s current toll road network. Since the traffic volume of a section like this is easier to predict, the project’s feasibility is easier to determine (from the return on investment). Jasa Marga is also conducting a feasibility study of the Benoa-Sarangan stretch in Bali, a route which connects Ngurah Rai Airport and South Bali, the island’s main destination for tourists. In addition, the company is also looking at the Serpong Cinere (West Java) section, which should be integrated into the JORR. Gempol – Pandaan (East Java) is another strategic section of the Trans Java toll road that would connect to the current Surabaya Gempol section. However, there are still some outstanding matters to settle regarding relocation of the current section due to the mud flow disaster.

Making good progress
The first stage of the Semarang-Solo toll road should be completed by the end of the month. An operational test will be undertaken by BPJT within one month and it is hoped that this section should be in commercial operation in late April. The tariff is expected to be Rp5,500, or translating into Rp550 per km. Jasa Marga also plans to start construction of BORR section 2A (flyover) – which is only 2km in length - to avoid a bottleneck at the crossroads. With the addition of a flyover, Jasa Marga shall propose a higher tariff of Rp5,500 (open system), or up from the current Rp3,000. Despite the solid progress, Jasa Marga faces difficulties in land acquisition for JORR W2 North although around 67% of the land owners have approved acquisition of their land. Acquisition of the remaining land is, however, subject to further negotiations on pricing.

E-Toll card usage needs to be boosted
The E-toll card was introduced in January 2009. Nonetheless, the E-toll card revenues are still only around 6% of the total revenues coming from the sections operating automatic toll gates, the inner city toll road and the airport expressway. This is only 1% of total revenues. Looking forward, we think that Jasa Marga needs to increase the number of toll roads using this system in addition to combining more merchants into the E-toll card for items such as parking and fuel. At the present time, the E-toll card issued by Bank Mandiri faces competition from Flazz BCA.