Share divestment transaction: 'Stamina booster' for Jasa Marga
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Transaksi divestasi saham: Vitamin penguat stamina Jasa Marga
10 December 2024
By Dionisio Damara
Jasa Marga has received a significant boost by obtaining Rp6.1 trillion in cash from Salim Group. This comes from the sale of 35% of its shares in PT Jasamarga Transjawa Tol. This development is expected to positively impact the company's performance in the coming year.
Additionally, the total value of the share divestment in PT Jasamarga Transjawa Tol (JTT) to the consortium comprising Salim Group and Government of Singapore Investment Corporation Private Limited (GIC) amounts to Rp15.75 trillion. The payment for this transaction will be made in instalments.
Richard Jerry, an analyst at BRI Danareksa Sekuritas, has stated that he met with Pramitha Wulanjani, the Finance Director of PT Jasa Marga (Persero) Tbk (JSMR), to discuss the latest business developments following the completion of the divestment transaction.
Following the meeting, Jasa Marga’s management reported that the company received the second payment for the divestment of JTT, amounting to Rp6.1 trillion, on 4 December 2024.
"The company is planning to further reduce its debt from the funds obtained from this transaction in December 2024," Richard said in a research publication on Monday (9/12).
Richard added that Jasa Marga’s management has set a target cost of debt at 7.5% for the next year.
The interest rate at the parent company level is 6.5%, while at the project level, it ranges from 7% to 9%.
In addition, the gearing ratio is expected to fall below the guideline of 2x, even though the state-owned toll road company requires capital expenditure for five new toll road projects in 2025.
"We predict that JSMR's capital expenditure will be around Rp7 trillion for 2025," Richard stated.
Richard mentioned that the funds from the payment will be used by the toll road state-owned enterprise (SOE) to significantly reduce its debt beginning in December this year.
According to the financial report as of the end of September 2024, Jasa Marga had a short-term bank debt of Rp10.6 trillion.
This amount represents an increase compared to last year, when it was Rp4.49 trillion.
During the same period, the company recorded financial costs of Rp3.11 trillion for January to September 2024.
This cost represents a 27.69% year-on-year (YoY) increase from Rp2.43 trillion.
Metro Pacific Tollways Corp (MPTC), owned by the Salim Group and GIC, recently completed its transaction to purchase 35% of JTT shares.
The GIC-MPTC consortium, which includes PT Margautama Nusantara (MUN), PT Metro Pacific Tollways Indonesia Services (MPTIS), and Warrington Investment Pte Ltd, paid a total of Rp15.75 trillion. This amount includes the value from the issuance of new shares.
According to a previous statement by MUN President Director Danni Hasan, the acquisition process was fully paid by the MPTC-GIC consortium on Wednesday, 4 December 2024.
With the completion of the second payment, analysts believe that JSMR will become more attractive in its operations, supported by a significant influx of fresh funds.
Richard stated that BRI Danareksa has once again issued a buy recommendation for JSMR, with a target price of Rp6,200.
Balance sheet
An analyst at Panin Sekuritas, Aqil Triyadi, mentioned that the divestment payment is a positive catalyst for the future strengthening of JSMR's balance sheet.
"In the first nine months of this year, the company’s net gearing ratio has improved to 1x from 1.6x between January and September 2023," Aqil said when contacted by Bisnis on Monday (9/12).
The net gearing ratio is a financial metric used to assess a company's debt level in relation to its equity.
Aqil added that JSMR is also likely to benefit from the 2024/2025 Christmas and New Year holidays, which typically lead to increased mobility on toll roads.
This is evident from the company's revenue in the fourth quarter of each year, which consistently shows significant growth.
"Historically, JSMR's share price has always increased in December over the past ten years, with an average rise of 4%," he stated.
Aligned with the forecast, Panin Sekuritas has issued a buy recommendation for JSMR shares, setting a target price of Rp6,200 per share.
NH Korindo Sekuritas Indonesia Analyst Richard Jonathan Halim has also issued a similar recommendation, maintaining a target price of Rp6,450 for JSMR.
He explained that the target price reflects the company's revenue ratio before EBITDA, which stands at 8.5x for this year, with a potential increase of 36.94%.
"This growth potential is supported by increased revenue from higher toll road tariffs, effective use of divestment proceeds, and improvements in the capital structure through reduced debt and interest," he explained in a research note.
According to him, the risks that the company must consider include changes in counterproductive regulatory policies, rising interest rates, and macroeconomic instability.
JP Morgan has issued a different recommendation by assigning a neutral rating, taking into account JSMR's expansion plans and capital expenditure needs for the next year.
Additionally, JP Morgan has set a target price of Rp5,000 per share for JSMR in December 2025. The firm has its own reasons for setting this target price and maintaining a neutral perspective on JSMR's shares.
"We hold a neutral view on JSMR. We anticipate that their shares will remain within a certain range over the next 12 months, as the forecast for CAGR profit is at 4% from 2024 to 2026. This represents a significant slowdown compared to the previous 18% from 2019 to 2024," JP Morgan stated in a research note dated 20 November 2024.
JP Morgan notes that JSMR still requires Rp60 trillion in capital expenditure to construct five toll roads. Additionally, JSMR is targeting an annual capital expenditure of Rp10 trillion.
Therefore, JP Morgan predicts that there is potential for increased debt, which could reduce profit growth.
"We believe that the higher dividend payment is the main catalyst for the re-rating."
Regarding JSMR's target share price of Rp5,000 per share, JP Morgan predicts that its P/E ratio for 2025 will reach 12x.
The institution believes that JSMR's profit will recover in line with the organic growth of toll roads, even though traffic growth is expected to slow down from 2024 to 2026. This slowdown is anticipated to be accompanied by increased debt due to higher capital expenditure following the Covid-19 pandemic.
