Jasa Marga (JSMR IJ) – resurfacing of JORR-S legal case is weak by Sarina Lesmina - CLSA

· This is an on-going legal case mentioned in JSMR's IPO prospectus in Nov2007.

· JORR-S is a 14km TB Simatupang section, which is part of the 43km JORR 1. JORR 1 contributes 20% to JSMR's total revenue; we estimate JORR-S contributes 7-8% to total JSMR revenue.

· JORR-S' previous owners lost this toll road due to a default by the contractor (Hutama Karya). The concession was seized by the court and given to Jasa Marga, who at the time was BOTH a toll road regulator and toll road operator. (Note: Current Toll road Regulator (BPJT) was formed in 2005).

· JSMR is given an "operational right" for this toll road for 15 years starting 2006.

· In the prospectus, it is mentioned that the Toll road Regulator will replace the "operational right" with a concession right. To date, this is still in process.

· While this issue could be an overhang, we think it is unlikely at this stage that JSMR will lose JORR-S given the "operational right" is a legal right given by the Ministry of Public Works at that time. Moreover, the fact that JSMR is a state-owned company also limits the risk of losing this. But we acknowledge that a proper concession right is needed to ensure no more litigation from previous owners.

Maintain BUY on JSMR, now trading at 14.4x PE11. Our TP of Rp4,200/sh represents 27% upside from current level. Our earnings and DCF-valuation has not reflected the upside from the recent new concession bought. The company is eyeing for more concessions from the 24 stalled toll road projects currently being evaluated by the government. See file for more details.