JSMR (TP Rp4,000): So far so good - Danareksa

Steady Traffic
Traffic was relatively steady in June at 90.9mn vehicles (+0.7% mom). This confirms that the restrictions on trucks did not have any significant adverse impact on inner city traffic. In fact, the inner city traffic was 1.7% mom higher at 22.1mn vehicles in June. The daily average traffic volume was 2.9mn vehicles (+1.0% mom, +12.3% yoy). Nonetheless, please bear in mind that yoy comparisons are not apple-to-apple - and therefore misleading – because of relocation of some toll gates and the resulting change in the traffic accounting system.

New toll road awarded
Jasa Marga has been awarded a new toll road project from Sarangan – Tj Benoa in Bali , which goes from the airport to the busy resort in the south. The toll road can be expected to be completed before the APEC summit in 2013. The length of the toll road is 10 km involving a Rp2.3tr investment. Fortunately, land acquisition for this project is minimal since the toll road shall run along the coast. Construction shall be more expensive, however, as the toll road is elevated. In other projects, reparation of the Semarang-Solo section has been done and approval is currently being sought from the toll road authority for commercial operation of the section. It is expected that the toll road shall be operational before the Lebaran Holidays in August 2011.

The missing piece of the puzzle
JORRW2 North is the missing link in the JORR toll road. The toll road passes through the two regional districts of South Jakarta and West Jakarta . In the South Jakarta area, land acquisition has reached 70.95% while in West Jakarta the figure stands at 89.36%. Jasa Marga aims to start construction in early 2012 with completion expected within 18 months. Jasa Marga may choose to split up the 7km toll road into two or three sections that utilize two to three different contractors, a move which would hopefully speed up its completion.

2Q11 results expected soon
The 2Q11 results are expected to be released in the last week of July 2011. We expect 2Q11 to be better than 1Q11 because of the stronger traffic (traffic reached 268.2mn vehicles in 2Q11 or up 5.7% qoq). And since Jasa Marga has not significantly increased its gearing, the operational improvement in 2Q11 should flow through to the bottom line. Given our expectation of good 2Q11 results, we maintain our BUY recommendation on the counter. Our Target Price is Rp4,000.