No downturn in traffic
The toll road network seems busier than ever with total monthly traffic at an all-time high of 101mn vehicles in May 2012 (+5.9% mom, +18.6% yoy). The number is very encouraging as it indicates no slowdown in domestic economy activity. Furthermore, the growth is evenly spread among all sections, suggesting that the economic gains are widespread. Cumulatively, up to May 2012, traffic reached 482.2mn vehicles (+11.8% yoy), translating to almost 4.0 mn vehicles per day.
Good growth from the newer sections
The contribution from the newer sections will be important as they carry higher average tariffs per km compared to the older sections. The tariff difference per km could be almost double. Nonetheless, the newer toll roads only represent a small proportion of Jasa Marga's total toll road portfolio. The total length of the toll roads operated after the year 2000 is only 76km - or 14% of the total length of all the toll roads. We expect another 190km of toll roads to be operated in the next 2-3 years. Of the three new sections - BORR, Surabaya Mojokerto and Semarang Solo - only the latter is showing a relatively slow growth rate.
JORR W2 North still in progress
We do have high hopes for the last piece of the puzzle, JORR W2 north, which should complete the Jakarta Outer Ring Road as a complete circle. The project has been divided into two stages - stage 1 Kebun Jeruk-Joglo and stage 2 Joglo-Ulujami. Land acquisition has reached 73.8% in stage 1 and 73.3% in stage 2. Jasa Marga aims to complete the land acquisition before the end of the year. Construction has also started. Stage 1 is 22% complete and stage 2 stands at 18.7%. Land acquisition remains the major issue, but Jasa Marga feels confident it can finalize land acquisition deals within the year.
Maintain BUY
Positively, Jasa Marga's traffic seems to be unaffected by the ongoing global turmoil. We have not seen any signs of weakness. In our view, the country's inadequate infrastructure is a huge opportunity for Jasa Marga, especially since it has an excellent business model. Nonetheless, we have not seen any acceleration of toll road development since the introduction of the new land bill. Even so, Jasa Marga is keeping up the pace in regard to its toll road development. BUY maintained with a Target Price of Rp6,100.
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