JSMR : Overweight, Target : 1980

Bloomberg Code : JSMR:IJ
Reuters Code : JSMR.JK

Jasa Marga ( JSMR ) would increase its toll roads fees on August 31, 2009. The percentage of the increased would be around 15% and would be applied to Jagorawi, Jakarta - Tangerang, Jakarta inner road, Pondok Aren - Ulujami, Padalarang - Cileunyi, Cipularnag, Palimanan - Kanci, Belmera - Medan, Semarang, Surabaya - Gempol and Jakarta outer ring road. (Source: TV One 12 Agustus). Based on this plan, if it is approved by the government, the ideal price for JSMR stock would be in the range of 1840 - 1980. Here is my projection:

(in Mio RP)	2Q-09	1Q-09	2008	2007	2006
Sales	861,889.00	820,551.00	3,319,340.00	2,617,710.00	2,270,450.00
Operating Income	321,256.00	367,735.00	1,371,620.00	1,015,950.00	819,453.00
Operating Margin	37.27%	44.82%	41.32%	38.81%	36.09%
Net Income	199,119.00	196,540.00	707,798.00	277,982.00	462,567.00
Net Margin	23.10%	23.95%	21.32%	10.62%	20.37%
Total Share	6,780.84	6,780.84
EPS	29.36	28.98
Annualized EPS	117.46	115.94

Based on its historical data, its net margin is around 22.5%. I applied this margin to forecast its 3Q and 4Q 2009. Here is the projection:

(in Mio RP)	4Q-09F	3Q-09F
Sales	991,172.35	904,983.45
Operating Income	366,733.77	334,843.88
Operating Margin	37.00%	37.00%
Net Income	223,013.78	203,621.28
Net Margin	22.50%	22.50%
Total Share	6,780.84	6,780.84
EPS	32.89	30.03
Annualized EPS	131.56	120.12

I applied the P/E multiplier to its Annualized EPS. Based on its strategic business and its long term growth potential, I believe the appropriate P/E would be at least 14 x - 15 x.

Expected Price	4Q-09F	3Q-09F	2Q-09	1Q-09
PE 14 x	1841.77	1681.62	1644.44	1623.14
PE 15 x	1973.33	1801.73	1761.90	1739.08