Jasa Marga. Upping the ante on growth (JSMR IJ) Toll road. Trading Buy. Road to prosperity. Company Report March 6, Short-term challenges remain

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1 (JSMR IJ) Upping the ante on growth Toll road Company Report March 6, 218 (Initiate) Trading Buy Road to prosperity The government s commitment to infrastructure development demonstrated through its active role in providing funds, efforts to improve the land acquisition process, and introduction of supportive policies is encouraging. In particular, we believe the Indonesian toll road industry will continue to flourish going forward, backed by the ever-growing 4W market. Short-term challenges remain Target Price (12M, IDR) 6,1 Share Price (3/5/18, IDR) 5,325 Expected Return 14.6% EBITDA (18F, IDRtr) 5.4 Consensus EBITDA (18F, IDRtr) 6.4 EPS Growth (18F, %) -46 Industry EPS Growth (18F, %) -1.4 EV/EBITDA (18F, x) 14.8 Industry EV/EBITDA (18F, x) 1.5 Market Cap (IDRbn) 38,648.2 Shares Outstanding (mn) 7,257.9 Free Float (mn) 2,176.2 Institutional Ownership (%) 77.5 Beta (Adjusted, 24M).9 52-Week Low (IDR) 4,4 52-Week High (IDR) 6,775 (%) 1M 6M 12M Absolute Relative (D-1yr=1) /17 3/17 4/17 5/17 5/17 6/17 PT. Mirae Asset Sekuritas Indonesia Infrastructure 7/17 JCI 7/17 8/17 9/17 1/17 Giovanni Dustin (ext: 267) giovanni@miraeasset.co.id 1/17 11/17 JSMR 12/17 12/17 1/18 2/18 2/18 (JSMR) aims to operate 1,497km of toll roads by FY2F (vs. 68km in FY17). We expect capex to reach IDR32.2tr in FY18F and IDR44.1tr in FY19F, with total capex of approximately IDR95tr over the next three years. Given the scale of its projects, we forecast JSMR s debt-to-equity ratio to increase from 1.5x in FY17 to 1.8x in FY18F and 2.3x in FY19F. Moreover, we expect its interest coverage ratio (ICR) to decrease from 5.2x in FY17 to 2.7x in FY18F and 2.x in FY19F. Given that toll road operations are not profitable in the early phases, we think pressure on the firm s EBITDA margin is inevitable. Due to the higher interest burden, negative bottom-line growth also seems unavoidable. but the future looks promising (if solid strategies are implemented) We think it is natural for ROE to decline in the short term, given the nature of capital-intensive businesses when they are in an expansionary mode. EBITDA margin and bottom line should see a gradual rebound after the capex period. Amid the current expansionary period, JSMR will likely rely on improved connectivity and the bi-annual tariff hike scheme to drive top line. Thus, prudent cost control and well-planned financing schemes should act as buffers to absorb the growing interest burden. If JSMR implements such strategies effectively, we are optimistic on its future, as route additions will serve as a catalyst for growth in the long run. Initiate with Trading Buy and TP of IDR6,1 We initiate our coverage on JSMR with a Trading Buy recommendation and target price of IDR6,1. We believe JSMR s expansion is likely to bear fruit in the long run. Due to the scale of the expansion, however, there could be challenges in the short term, as financing remains a major hurdle for the company. Still, with support from the government along with solid financing schemes, lower cost of capital, and prudent cost controls, we believe JSMR can unlock a promising future. Key risks to our call include: 1) unsupportive government regulations and/or interventions; and 2) higher-than-expected financing costs. FY (Dec.) 12/14 12/15 12/16 12/17 12/18F 12/19F Revenue (IDRbn) 7,253 7,646 8,879 9,8 1,494 12,74 EBITDA (IDRbn) 3,648 3,973 4,786 5,16 5,427 5,914 Net Profit (IDRbn) 1,422 1,466 1,889 2,2 1,198 1,316 EPS (IDR) BPS (IDR) 1,518 1,74 2,251 2,53 2,75 3,1 P/E (x) P/B (x) EV/EBITDA (x) ROE (%) ROA (%) Dividend Yield (%) Net debt-to-equity (x) estimates Note: NP refers to net profit attributable to controlling interests PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

2 C O N T E N T S Company background 3 Company overview 3 History of 3 Company structure 5 Operations breakdown 6 Toll road industry in Indonesia 8 President Jokowi s infrastructure reform agenda 8 Higher infrastructure budget 9 Improved land acquisition process 1 Large and under-penetrated 4W market 11 Investment thesis 12 Short-term challenges remain 12 but the future looks promising (if solid strategies are implemented) 14 Valuation 23 Initiate with Trading Buy and TP of IDR6,1 23 2

3 Company background Company overview (JSMR), an Indonesian toll road operator and developer, went public in November 27 and is currently managing 68km of toll roads in the country. By end-22, management is targeting 817km of additional toll roads bringing the total to 1,497km to support the government s agenda and increase the company s value in the long run. JSMR is the current leader of Indonesia s toll road industry. As of FY17, the company operated 68km of toll roads, controlling around 62% of total toll road operations and around 8% of total toll road transaction volume in the country. JSMR focuses on toll road development in the Java and Sumatra areas, which have the highest traffic and are the most densely populated, and thus provide higher internal rate of return (IRR). Figure 1. JSMR s ownership structure and business portfolio History of First toll road operator and authority in Indonesia JSMR was formed by the Indonesian government in 1978, and in the same year operated its first toll road section and the first toll road in Indonesia, Jagorawi (Jakarta-Bogor-Ciawi). In 198, JSMR was assigned the role of Indonesia s toll road operator. Its main functions were planning, building, operating, and maintaining toll road facilities. Starting in 1987, the Indonesian government offered the private sector the opportunity to participate in toll road development hand-in-hand with JSMR through the build, operate, and transfer (BOT) scheme. This changed the scope of JSMR s operation, giving it the dual role of toll road operator and toll road authority. 3

4 JSMR became a pure toll road operator in 24 Following regulatory changes in 24, however, JSMR returned the authority function to the Toll Road Regulatory Agency (BPJT), a government agency under the Ministry of Public Works (Kementerian Pekerjaan Umum dan Perumahan Rakyat/PUPR). Following the enactment of Law No.38/24 requiring any investment in new toll road concessions to be carried out via the establishment of a separate business entity, JSMR established 18 toll road subsidiaries for its 18 new toll road investments. Figure 2. Indonesia s toll road regulatory framework IPO in 27 In 27, went public through an initial public offering (IPO) and listed its shares on the Indonesia Stock Exchange (IDX). The company was able to raise IDR3.37tr by selling 3% of its shares; the Indonesian government holds the remaining 7% stake. Figure 3. JSMR s milestones 4

5 Company structure Shareholder structure The government of Indonesia is the largest shareholder with a 7% stake, while the public owns 3%. Table 1. Shareholder composition (Shares, %) Entity Number of shares Percentage Government of Indonesia 5,8,59,84 7 Public 2,177,361,36 3 Management team Table 2. List of commissioners and directors Name Position Refly Harun President Commissioner Agus Suharyono Commissioner Boediarso Teguh Widodo Commissioner Sugiharjo Commissioner Muhammad Sapta Murti Commissioner Sigit Widyawan Independent Commissioner Desi Arryani President Director Donny Arsal Director of Finance Mohammad Sofyan Director of Operation I Subakti Syukur Director of Operation II Hasanudin Director of Development Kushartanto Director of Human Resources President Director: Desi Arryani Arryani (born on December 29, 1962) joined JSMR in 216. She previously served as Director of Operations I at PT Waskita Karya (Persero) Tbk. ( ) and Director of Operations II of PT Waskita Karya (Persero) Tbk. ( ). She earned a bachelor s degree in civil engineering from the University of Indonesia and a Master of Management from Prasetya Mulya. Director of Finance: Donny Arsal Arsal (born on June 24, 197) was appointed JSMR s Director of Finance on March 15, 217. He earned a bachelor's degree from the University of Indonesia. Previously, he served as Director and Head of Investment Banking of PT Mandiri Sekuritas (21-217), Associate Director of PT Mandiri Sekuritas (24-21), and Assistant Vice President of PT Mandiri Sekuritas (23). Director of Operation I: Mohammad Sofyan Sofyan (born on October 3, 1971) previously served as Corporate Secretary of PT (Persero) Tbk. ( ), VP Corporate Planning of PT (Persero) Tbk. ( ), and Head of Monitoring & Evaluation of PT (Persero) Tbk. (21-212). Director of Operation II: Subakti Syukur Syukur (born on July 7, 1962) previously served as President Director of PT Marga Lingkar Jakarta ( ) and General Manager of Cawang-Tomang-Cengkareng Branch ( ). He earned a bachelor s degree in civil engineering from Bandung Institute of Technology and a Master of Management from Unkris Jakarta. 5

6 Director of Development: Hasanudin Hasanudin (born on September 26, 1963) joined JSMR in He previously served as Head of Maintenance Division (26-212), Commissioner of PT Marga Mandala Sakti (28-21), and Cipularang Toll Road Project Leader (24-25). He earned his bachelor s degree in transportation engineering from Ten November Institute of Technology and a master s degree in transport engineering from the University Of New South Wales, Australia. Director of Human Resources: Kushartanto Kushartanto (born on April 24, 1961) previously served as President Director of KTalents Asia ( ), Group HR Director of Agung Podomoro Group (21-215), HR and Business Support Director of Lotte Shopping Indonesia (27-21), Country Director of Operations and HR at Watson-Hutchinson, Group HR Director of PT Mitra Adiperkasa Tbk, and Corporate HR Director of Hero DairyFarm International (PT Hero Supermarket Tbk). He also held positions at Coca-Cola Amatil Indonesia and PT BAT Indonesia Tbk. He completed his studies at Undip and IPMI. Operations breakdown Revenue and operational cost breakdown JSMR derives 91% of its revenue from toll road operations. Personnel expenses account for the largest share of operational costs (31%). Figure 4. Revenue breakdown (FY17) Toll revenue Construction revenue Other operating revenues Figure 5. Operational cost breakdown (FY17) Personnel expenses Depreciation and amortization Cost of sales maintenance services, fuel sold, and property Provision for overlay Others 2% 7% 27% 31% 13% 91% 5% 24% 6

7 Toll road network Currently, JSMR operates 68km of toll roads, while its total toll road concessions stand at 1,497km. Of note, the toll sections that generated the most revenue for JSMR in FY17 were Cawang-Tomang-Cengkareng (18% of toll road revenue), Purwakarta-Bandung-Padeleunyi (Purbaleunyi; 16%), and Jakarta-Cikampek (15%). Figure 6. JSMR s toll road network Table 3. JSMR s revenue breakdown by toll road section Toll section FY12 FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY2F FY21F FY22F Jakarta - Cikampek ,23 1,138 1,233 1,266 1,316 1,356 1,41 1,467 1,525 JORR (S and Non-S) 1,216 1,55 1,182 1,164 1,1 1,25 1,56 1,87 1,19 1,153 1,176 Cawang-Tomang-Cengkareng 1,64 1,11 1,212 1,247 1,413 1,475 1,549 1,611 1,691 1,776 1,847 Jagorawi ,127 1,184 1,421 1,534 1,718 Jakarta-Tangerang ,5 1,55 1,214 1,335 1,535 Surabaya-Gempol Purbaleunyi 925 1,17 1,176 1,198 1,351 1,299 1,338 1,378 1,419 1,519 1,625 Palimanan-Kanci Semarang Seksi A,B,C Belmera Cengkareng-Kunciran Kunciran-Serpong Jakarta-Cikampek II Elevated Jakarta-Cikampek II South JORR W2N Semarang-Solo Nusa Dua-Benoa Bogor Outer Ring Road Gempol-Pandaan Surabaya-Mojokerto Gempol-Pasuruan Medan-Kualanamu-Tb.Tinggi Solo-Ngawi Ngawi-Kertosono Batang-Semarang Balikpapan-Samarinda Pandaan-Malang Serpong-Cinere Manado-Bitung Probolinggo-Banyuwangi Total toll road revenue 5,582 5,83 6,646 7,121 7,927 8,281 9,281 1,488 12,85 13,647 15,615 (IDRbn) 7

8 Toll road industry in Indonesia Since his inauguration, President Jokowi has pledged to deliver structural reforms to Indonesia. He scrapped fuel subsidies and transformed idle spending into productive spending. In addition, he and his administration announced a series of reform policies to invigorate the sagging economy. Thus far, we are encouraged by the government s commitment to infrastructure development, which it demonstrates through its active role in providing funds, efforts to improve the land acquisition process, and introduction of supportive policies. In particular, we believe the Indonesian toll road industry will continue to flourish going forward, backed by the ever-growing 4W market. President Jokowi s infrastructure reform agenda Infrastructure bottleneck holds Indonesia back Indonesia s infrastructure competitiveness lags behind its regional peers. Among 138 countries surveyed by the World Economic Forum (WEF), Indonesia ranked 8 th in overall infrastructure quality trailing Malaysia (19 th ), Thailand (72 nd ), and China (43 rd ). The survey evaluated infrastructure conditions on a 1-to-7 scale, with a higher score indicating a higher degree of competitiveness. Even though Indonesia has the 16 th largest economy in the world, its infrastructure scored just 3.8, behind its regional peers and the world average of 4.1. Table 4. Infrastructure competitiveness survey Country Rank Score Switzerland Malaysia Australia China Thailand Indonesia Vietnam Mauritania Source: World Economic Forum, Mirae Asset Sekuritas Indonesia Research 1,km of toll roads: A top priority Since his inauguration, President Jokowi has pledged to deliver structural reforms to Indonesia. In particular, he is determined to invigorate Indonesia s economy through a massive infrastructure reform agenda. As part of this agenda, the government rolled out the National Medium Term Development Plan (Rencana Pembangunan Jangka Menengah Nasional/RPJMN), which aims to reduce logistics costs to only 19.2% of GDP by 219 (vs. 23.5% in 214) and sets a new toll road length target of 1,km. Given that funding problems and an inefficient land acquisition process hampered infrastructure development in the past, President Jokowi s reform agenda focuses on accelerating infrastructure development by increasing the infrastructure budget and improving the land acquisition process. 8

9 Figure 7. Land acquisition: The main drag on toll road projects Construction Permit Funding Planning and preparation Land acquisition % 5% 1% 15% 2% 25% 3% 35% 4% 45% 5% Source: KPPIP, Mirae Asset Sekuritas Indonesia Research Higher infrastructure budget Securing more fiscal flexibility is a positive step In the past, low fiscal flexibility caused infrastructure development to be neglected. The government of Indonesia has been providing fuel subsidies since the oil price shock in the 197s. Spending on fuel subsidies exceeded productive public spending (e.g., education, infrastructure, healthcare, etc.) and contributed to a large budget deficit. Subsidy reform was difficult, however, as Indonesians became accustomed to low fuel prices, and the government came to depend on stable approval ratings. Due to limited fiscal flexibility, the government had to focus its infrastructure efforts on only densely populated areas (i.e., Java and Sumatra). When President Jokowi assumed office, he voiced his strong intention to extend infrastructure development to the outskirts of Indonesia and thereby boost economic growth. Naturally, this required improving the nation s fiscal flexibility. When oil prices faltered in 214, President Jokowi capped the diesel subsidy and scrapped the gasoline subsidy, announcing the government would set retail prices using a marketbased mechanism. By switching from idle to productive spending, he secured the fiscal flexibility to maneuver and implement his reform agenda, particularly economic growthoriented infrastructure projects. With improved fiscal flexibility, President Jokowi moved swiftly to increase the infrastructure budget. In 215, his first full year, he increased infrastructure spending to 15% of the state budget, from 9% the previous year. For 218, the government earmarked IDR411tr for infrastructure spending (+2.4% compared to the 217 revised budget/apbn-p 217). The land clearing reimbursement fund was also raised by 77% to IDR35tr. Figure 8. Increase in infrastructure spending since President Jokowi took office (IDRtr) 5 4 Infrastructure spending Fuel subsidies FY5 FY6 FY7 FY8 FY9 FY1 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Source: Government, Mirae Asset Sekuritas Indonesia Research 9

10 but is still not sufficient Curbing subsidies alone, however, is insufficient to secure the astronomical figures needed to fund Indonesia s infrastructure projects. Because of their huge scale, the government cannot possibly finance all of its planned projects directly. Indonesia s more-than 245 strategic national projects have a total investment value north of IDR4,2tr (31% of FY17 GDP). The scale of reforms President Jokowi is pushing means curbing subsidies alone would still widen the budget deficit. The budget is stretched to the limit, as tax revenue growth will be gradual (improving compliance post-tax amnesty will take some time). Fiscal flexibility is further limited by the legally stipulated maximum budget deficit (3% of GDP). Alternative financing schemes to bridge the gap To overcome this problem, the Indonesian government is transferring some of the burden to state-owned companies (SOEs) including JSMR by encouraging them to fund infrastructure projects through alternative financing schemes, some of which have been utilized by JSMR. Although JSMR has received only a one-time state capital inclusion (Penyertaan Modal Negara/PMN) of IDR1.25tr through a rights issue in FY16, we believe the company enjoys multiplier effects from higher infrastructure spending as well as other government initiatives, such as changes to the land acquisition and reimbursement process. Improved land acquisition process New laws and regulations accelerate the process For the government to realize its goal of 1,km of additional toll road length commencing operation by FY19F, an improved land acquisition process is critical. Indeed, the land acquisition process used to be the main drag on toll road projects, but has accelerated after the implementation of Law (UU) No.12/212 and Presidential Regulation No. 71/212 (and its revisions). In the past, the process could drag on indefinitely if landowners and the government could not agree on prices. The revised law and regulations stipulate time limits for the preparation ( working days) and implementation ( working days) stages essentially limiting the land acquisition process to 492 days. Notably, construction on a number of stalled toll road projects including Solo-Ngawi (signed in 211), Ngawi-Kertosono (211), Pejagan-Pemalang (26), Ciawi-Sukabumi (27), and Bekasi-Cawang-Kampung Melayu (27) resumed on the back of the improved land acquisition process. We believe the government s strong focus on infrastructure projects coupled with better laws and regulations on land acquisition is a game changer for the toll road investment climate in Indonesia. Figure 9. Improved land acquisition process supports toll road expansion plan Reimbursement: Better late than never The government bears the full cost of land acquisition. Under the latest revision, the land acquisition process falls under the jurisdiction of the National Land Agency (Badan Pertanahan Nasional/BPN), and the acquisition price is determined by independent 1

11 appraisers based on the fair market price, rather than tax value, of the land. Due to the scale of infrastructure funding needs, however, the government has difficulty providing the necessary funds in time. As such, the government allows concession holders to bridge financing for land acquisition costs to expedite the process. In other words, concession holders are allowed to prepay land acquisition costs. Through the State Asset Management Agency (Lembaga Manajemen Aset Negara/LMAN), the government then reimburses the total land acquisition cost, including the cost of debt incurred. Large and under-penetrated 4W market Indonesia s 4W market is under-penetrated The Indonesian automotive market is still heavily under-penetrated. Notably, high car ownership penetration correlates with high GDP per capita. According to the International Monetary Fund (IMF), as of 216, only 59 out of every 1, Indonesians were listed as car owners quite low relative to neighboring countries Malaysia (348) and Thailand (27), which have higher GDP per capita. Figure 1. High car ownership penetration correlates with high GDP per capita (USD/capita) 1, 9,58 GDP per capita (LHS) Car ownership penetration (RHS) (cars/1, people) 4 8, 3 6, 5, , 3,57 2,951 2, 2,171 1 Malaysia Thailand Indonesia Philippines Vietnam Source: IMF, Bloomberg, Mirae Asset Sekuritas Indonesia Research 4W domestic demand will continue to increase We attribute Indonesia s low car penetration to its low GDP per capita, which limits purchasing power. Still, we expect 4W domestic demand to continue to climb going forward. We highlight recent changes to the minimum wage formula, which should help lowerincome households and translate to higher GDP per capita; this, in turn, should lead to more middle-income households, which are likely to play a major part in boosting local 4W demand. Note that Thailand s GDP per capita stands at USD5,911, and its car penetration has reached 27 cars/1, people. Given that the IMF projects Indonesia s GDP per capita to reach USD5,79 in FY22F, we think Indonesia s car penetration could potentially triple and approach Thailand s current level. Furthermore, according to Business Monitor International (BMI), 43mn Indonesians will enter the USD1k-25k/year income bracket by FY19F. Considering that a high level of disposable income is generally required to purchase 4W vehicles (currently, the cheapest new models cost around USD1k), the growth in middleincome households should bode well for 4W demand. Table 5. Change in number of people by household income group, (mn people) Income Group (USD) China India Indonesia Philippines Vietnam Sub-1k k k k k k Source: BMI, Mirae Asset Sekuritas Indonesia Research 11

12 Investment thesis We believe JSMR s capex expansion is likely to bear fruit in the long run, as new toll road construction should drive revenue growth in the coming years. Due to the scale of the expansion, however, there could be challenges in the short term, as financing remains a major hurdle for the company. Still, given support from the government along with solid financing schemes, lower cost of capital, and prudent cost controls, we believe JSMR possesses promising long-term upside potential. Short-term challenges remain Capex expansionary cycle JSMR aims to operate 1,497km of toll roads by FY2F (vs. 68km in FY17). In FY18F, we expect JSMR to operate an additional 321km of toll roads: Solo-Ngawi (9km), Ngawi- Kertosono (87km), Bogor Outer Ring Road/BORR (3km), Semarang-Solo (32km), Gempol- Pasuruan (2km), Medan-Kualanamu-Tebing Tinggi (27km), and Batang-Semarang (75km). Note that some projects, namely Pandaan-Malang (9km) and Kunciran-Serpong (22km), are likely to be delayed to FY19F due to slower-than-expected land acquisition progress. Table 6. JSMR s project pipeline (completion years are Mirae estimates) Toll road project Section Length (km) JSMR investment cost (IDRtr) Construction cost (IDRtr) 218F Solo-Ngawi Solo-Ngawi Ngawi-Kertosono Ngawi-Kertosono Bogor Outer Ring Road (BORR) Kd. Badak-Yasmin Semarang-Solo Salatiga-Solo Gempol Pasuruan Rembang-Pasuruan Medan-Kualanamu-Tb.Tinggi Tj. Morowa-Parbarakan-Kualanamu, Sei Rampah-Tb.Tinggi Batang-Semarang Batang-Krapyak Total F Bogor Outer Ring Road (BORR) Yasmin-Darmaga Serpong-Cinere Serpong-Cinere Gempol-Pasuruan Pasuruan-Grati Pandaan-Malang Pandaan-Malang Manado-Bitung Manado-Bitung (JORR 2) Cengkareng-Kunciran Cengkareng-Kunciran (JORR 1) Kunciran-Serpong Kunciran-Serpong Balikpapan-Samarinda Balikpapan-Samarinda Jakarta-Cikampek II Elevated Jakarta-Cikampek Total F Probolinggo-Banyuwangi Probolinggo-Banyuwangi Jakarta-Cikampek II South Jakarta-Cikampek Total Note: We assume construction cost of 9% of investment cost We expect capex to reach IDR32.2tr in FY18F and IDR44.1tr in FY19F, with total capex of approximately IDR95tr over the next three years. Given the scale of the projects and our EBITDA forecasts of IDR5.4tr in FY18F and IDR5.9tr in FY19F, we forecast JSMR s debt-toequity ratio to increase from 1.5x in FY17 to 1.8x in FY18F and 2.3x in FY19F. Moreover, we expect its interest coverage ratio (ICR) to decrease from 5.2x in FY17 to 2.7x in FY18F and 2.x in FY19F. Note that our projections are still well within JSMR s debt covenant (maximum debt-to-equity ratio of 5.x and minimum ICR of 1.25x). 12

13 Figure 11. JSMR s expansionary cycle Figure 12. will stretch its book (IDRtr) Capex (LHS) Growth YoY (RHS) (%) 5 25 (x) 3 Net debt-to-equity (LHS) Interest coverage (RHS) (x) FY16 FY17 FY18F FY19F FY2F -1 FY16 FY17 FY18F FY19F FY2F should translate to a period of muted earnings growth We expect JSMR s toll road revenue to grow by 12% in FY18F and 13% in FY19F. The main drivers will be higher traffic on existing routes from the addition of 817km of new toll road sections (to go into operation during FY18-2F), as well as toll tariff adjustments. We estimate EBITDA to reach IDR5.4tr (+5% YoY) in FY18F and IDR5.9tr (+9% YoY) in FY19F. Note that gross and EBITDA margin declining trend in the short term is natural, as new toll roads typically do not yield high traffic volume during the early years, even though operational expenses and depreciation kick in instantaneously as the toll roads operate. Meanwhile, we project net profit to reach IDR1.2tr in FY18F and IDR1.3tr in FY19F. This translates to a net profit decline of 46% YoY in FY18F and net profit growth of 1% YoY in FY19F (excluding potential one-off gains from toll road divestments), due to higher interest burden (which we estimate at IDR2.2tr in FY18F and IDR3.tr in FY19F). We think it is natural for ROE to decline in the short term, given the nature of capitalintensive businesses when they are in an expansionary mode. EBITDA and net margin should see a gradual rebound after the capex period. Figure 13. JSMR s EBITDA (IDRbn) EBITDA (LHS) Growth YoY (RHS) (%) 9, 2 Figure 14. and net profit to improve post-capex period (IDRbn) Net profit (LHS) Growth YoY (RHS) (%) 2, , 1 6, 1, , 3, FY16 FY17 FY18F FY19F FY2F FY16 FY17 FY18F FY19F FY2F -5 13

14 but the future looks promising (if solid strategies are implemented) Amid the current expansionary period, JSMR will likely rely on improved connectivity and the bi-annual tariff hike scheme to drive top line. Thus, prudent cost control and well-planned financing schemes should act as buffers to absorb the growing interest burden. If JSMR implements such strategies effectively, we are optimistic on its future, as route additions will serve as a catalyst for growth in the long run. Better connectivity to drive traffic growth As of FY16, the population of Indonesia stood at 261mn people, of whom around 146mn, or 56% of the total, were based in Java, and around 51mn (2%) lived in Sumatra. Thus, Java and Sumatra make up around 76% of Indonesia s population. These two islands also have the highest 4W penetration among the big islands. Unsurprisingly, the government prioritizes toll road development on the two islands, through the Trans-Java and Trans- Sumatra toll road projects. Figure 15. Indonesia s population by island Java Sumatra Other islands Figure 16. Indonesia s car penetration per kilometer (cars/km) 6 24% 4 56% 2 2% Java Indonesia Bali and Sumatra Borneo Sulawesi Maluku average Nusa Tenggara and North Maluku Papua Source: Government, Mirae Asset Sekuritas Indonesia Research Source: PUPR, Mirae Asset Sekuritas Indonesia Research Note that most of JSMR s new toll roads are located in Java and are connected to existing routes. Even though toll road operations are not profitable in the early phases, we expect improved toll road connectivity to increase traffic on existing toll roads, as well as help ensure adequate traffic volume on new toll roads. Thus, JSMR is likely to rely on older routes, which will see traffic volume upside due to better connectivity. Figure 17. Most of JSMR s new toll roads are connected to existing routes Note: Data as of January 4,

15 Indeed, after the completion of the Cikampek-Palimanan (Cipali) toll road in June 215 (end- 2Q15), JSMR s Jakarta-Cikampek and Palimanan-Kanci (Palikanci) toll roads saw noticeable traffic growth in the subsequent quarters. However, both routes traffic volumes started to decline in 216, the former due to severe traffic congestion resulting from construction of Jakarta-Cikampek Elevated and Jadetabek LRT, and the latter due to transaction system changes and the abolition of toll booths. Figure 18. Jakarta-Cikampek traffic growth (mn vehicle) Traffic volume Growth YoY (%) 6 1 Figure 19. Palikanci traffic growth (mn vehicle) Traffic volume Growth YoY (%) Putting aside the problems specific to those routes, we believe construction of the remaining pieces of the Trans-Java toll road should result in better connectivity and hence improve traffic on all of JSMR s existing toll road sections in Java. We expect JSMR to add 321km and 328km of toll road length in operation in FY18F and FY19F, respectively, and we project toll road revenue to grow by 12% in FY18F and 13% in FY19F. It is worth noting that JSMR reflects the potential upside from toll road connectivity in its IRR calculation when bidding for new projects. According to management, it aims for projects with 14-16% IRR. Bi-annual tariff hike scheme: Oldie but goodie Initial toll tariffs are calculated based on investment feasibility, toll road users ability to pay, and vehicle operating costs. Toll tariff adjustments, on the other hand, are calculated based on CPI and are adjusted once every two years. Toll tariff adjustments used to be set by presidential decree (in consultation with the parliament), but are now decided by the Minister of Public Works. This change has led to more timely decision-making. In addition, the policy of adjusting toll tariffs once every two years has been considered effective since its implementation in 24. This system allows JSMR to forecast its future cash flow with a higher degree of accuracy, and allows for more stable finance planning, which we think is crucial during this capex cycle. Note that 11 out of JSMR s 19 toll roads in operation have tariff adjustments in odd years, with the full impact reflected in the following year. To take three of JSMR s toll roads as examples, the Jakarta-Cikampek tariff is adjusted in even years (FY12, FY14, and FY16 in Figure 21), while the JORR and Surabaya-Gempol tariffs are adjusted in odd years (FY13 and FY15 in Figure 21). It is apparent that in each case, average revenue per vehicle (ARPV) increased substantially in the following year. Specifically, Jakarta-Cikampek ARPV increased 6% and 7% in FY13 and FY15, respectively; JORR ARPV increased 1% and 16% in FY14 and FY16, respectively; and Surabaya-Gempol ARPV increased 12% and 1% in FY14 and FY16, respectively. 15

16 Figure 2. Jakarta-Cikampek (even) Figure 21. Surabaya-Gempol (odd) Figure 22. JORR (odd) (IDR/vehicle) (%) 8, ARPV 8 Growth YoY 6, 6 4, 4 2, 2 (IDR/vehicle) (%) 5, ARPV 14 Growth YoY 12 4, 1 3, 8 2, 6 4 1, 2 (IDR/vehicle) (%) 8, ARPV 2 Growth YoY 6, 1 4, 2, -1 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY11 FY12 FY13 FY14 FY15 FY16 FY17-2 Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research Prudent cost control to support stable EBITDA margin An e-payment system called e-toll was launched in 29, with the goal of helping JSMR reduce its operating costs in the long run. In 217, the government decided to enforce cashless transactions for all toll road sections. As of October 31, 217, JSMR s toll roads in operation reached 1% e-toll penetration. In addition, JSMR extended access to the e-payment option through cooperation with stateowned banks such as BRI, BNI, and BTN, as well as some non-soe banks, including BCA, Nobu Bank, and Bank Mega. These banks now join Bank Mandiri, which had been the sole e- toll payment provider since 29. Such e-payment cooperation has helped e-toll card penetration by offering more flexibility to toll road users. Figure 23. E-toll penetration reached 1% in October 217 (%) E-toll penetration (LHS) Growth % YoY (RHS) (% YoY) We believe e-toll penetration is a long-term necessity, as JSMR must control its operating costs and improve efficiency. Notably, three to four workers are required to maintain a regular toll booth for a single shift, and every toll booth has three shifts per day. On the other hand, only one worker is needed to manage two to three automated toll booths (Gerbang Tol Otomatis/GTO). Currently, operating expense growth is outpacing toll tariff hikes. Personnel expenses, which account for the highest proportion (around 31%) of operating costs, grew at 8.5% CAGR during FY13-17, sharply outpacing inflation. As JSMR s toll tariffs are adjusted biannually based on the inflation rate, the fact that personnel expenses are increasing more rapidly than inflation is alarming. Thus, the e-toll system is needed to suppress rising personnel expenses. 16

17 Figure 24. Personnel expenses growth is consistently higher than inflation growth (Growth YoY %) 18 Personnel expenses Inflation FY12 FY13 FY14 FY15 FY16 FY17 Source: BPS, Company data, Mirae Asset Sekuritas Indonesia Research Although JSMR has officially reiterated its intention not to lay off employees despite 1% e- toll implementation, we still think the spread of e-toll will help curb rising personnel expenses. Instead of massive layoffs, the company offers a rotation program (called A-Life) for its toll booth personnel. The program gives toll booth workers five options. Although we do not expect the majority of workers to leave JSMR (options 4 and 5), personnel expense growth should still be limited, as the A-Life program should reduce the need for additional recruitment in the coming years. That said, it could cause one-off expenses in the coming quarters. Indeed, in FY17, workforce reduction expenses amounted to IDR182bn (booked under other expenses ) for around 8 employees (around 4 employees chose options 4 and 5). It is also worth noting that JSMR has around 1, employees set for natural retirement in the next three years. Besides its cost-saving effect, e-toll also reduces bottlenecks by improving efficiency. An e- toll booth processes each payment in an average of under five seconds, compared to seven seconds for a regular toll booth. Figure 25. A-Life program Good financing schemes Toll road companies like JSMR operate capital-intensive businesses that require a substantial initial outlay of cash to get things up and running. As assets are typically very expensive to acquire, toll road companies often rely on debt financing (in addition to equity), and are usually highly leveraged. JSMR is no exception. Given the scale of its projects coupled with the restrained government budget, JSMR relies on alternative financing schemes to avoid excessive interest expenses. The firm has historically used 7:3 debt/equity financing for its projects. 17

18 Despite the massive capex journey ahead, we believe JSMR can secure sufficient funding for its projects with good financing schemes. Rights issue. In FY16, JSMR expanded its balance sheet through a IDR1.78tr rights issue (featuring a state capital inclusion, or Penyertaan Modal Negara/PMN, of IDR1.25tr). Proceeds went toward developing three new toll road projects: Semarang-Batang (5% of total proceeds), Pandaan-Malang (3%), and Jakarta- Cikampek II elevated (2%). JSMR currently has no further rights issue plans. Local bond. The company plans to issue local bonds with value totaling IDR13tr in FY18-19F. In FY18F, JSMR aims to issue IDR5tr worth of bonds, mainly for refinancing purposes. For FY19F, the company set a bond issuance target of IDR8tr, which will be used for refinancing (IDR7tr) and injection into subsidiaries (IDR1tr). S&P s recent upgrade to Indonesia s sovereign rating, along with the low-rate environment, provides JSMR an opportunity to issue bonds with lower coupon rates. Indeed, Indonesia s 1-year government bond yield has fallen continuously, and as of December 217 stood at 6.3% well below its five-year mean of 7.7%. According to our sensitivity analysis, for every 1% decline in the gross cost of debt, JSMR s net profit would increase around 1%. Figure 26. JSMR s cost of debt over the years (%) Bank loans Bonds Weighted average cost of debt FY13 FY14 FY15 FY16 FY17 Global bond. In December 217, JSMR issued an IDR-denominated global bond, dubbed the Komodo bond, and listed it abroad. The issue raised IDR4tr (USD295.7mn). The bond carries a 7.5% coupon rate and three-year tenor (maturing in FY2). It was rated Baa3 by Moody's and BB+ by S&P, and was oversubscribed by 3.8x. The bond is the first of its kind, as previously, the Indonesian government and corporations only sold USD-denominated bonds abroad (global USD bonds). Management currently has no further plans to issue another global bond. Table 7. Komodo bond Item Description Instrument Komodo Bond Proceed IDR4tr Tenors Three years Rating Baa3 (positive) - Moody's, BB+ (stable) - S&P Use of funds To finance capital expenditure, acquisition, working capital, and other financing needs. Coupon 7.5% Coupon payment Fixed rate, semi-annual Listing date December 13, 217 Listing LSE (London Stock Exchange) dan SGX (Singapore Exchange Limited) 18

19 Project bond. Project bonds are used to refinance syndicated bank loans that were utilized for project construction. In 4Q17, JSMR successfully raised IDR1.5tr from JORR W2N s project bond. The bond entails five series with varying tenors (three to 12 years) and coupon rates (7-9%). This type of bond offers a greater degree of flexibility for JSMR, as a project bond s principal repayment and tenor can be adjusted in line with the project s cash flow. Additionally, it can help reduce weighted average cost of debt, as project bonds often receive high credit ratings, translating to lower cost of funds. Going forward, JSMR plans to issue project bonds for Bali, BORR, and Surabaya- Mojokerto. Management aims to issue the project bonds for Bali and Surabaya- Mojokerto in FY18F. Table 8. JORR W2N s project bond Item Description Instrument Obligasi I Marga Lingkar Jakarta Tahun 217 Proceed IDR1.5tr Tranches Seri A (MLJK1A) - 3 years, IDR2bn (7.45%) Seri B (MLJK1B) - 5 years, IDR217bn (7.75%) Seri C (MLJK1C) - 7 years, IDR299bn (8.3%) Seri D (MLJK1D) - 1 years, IDR32bn (8.7%) Seri E (MLJK1E) - 12 years, IDR464bn (8.85%) Rating idaaa (Pefindo) Use of funds 9% Investment Credit Refinancing, 8% Reserve Capital, 2% Working Capital Coupon payment Quarterly Listing date November 9, 217 Listing Indonesia Stock Exchange Asset monetization. Through the sale of existing toll road stakes (divestment), JSMR can promptly increase its cash assets. In May 217, JSMR sold 15% of its stake in Semarang-Solo (PT Trans Marga Jateng/TMJ) at around 3.4x P/B, translating to a price of IDR783bn. JSMR s ownership in TMJ fell from 74% to 59%, and the gain on divestment amounted to IDR563bn. After the transaction, TMJ is jointly controlled by JSMR and PT Astratel Nusantara (a subsidiary of Astra International; ASII/Hold/IDR9,125), although JSMR s ownership is still at 59%. Additionally, the change in TMJ control is treated as a single transaction. Therefore, from 9M17 onwards, JSMR does not consolidate TMJ into its consolidated financial statements; rather, it records its ownership in TMJ as an investment in JV. This year, JSMR plans to divest its entire stake in JORR W1 (Kebon Jeruk- Penjaringan, currently 19% stake), aiming to complete the transaction in 2H18. Management is also considering divesting JSMR s standalone toll road sections, as it believes such sections yield low operational efficiency and traffic growth. JSMR currently owns four standalone toll road sections: Medan-Kualanamu-Tebing Tinggi, Balikpapan-Samarinda, Manado-Bitung, and Nusa Dua-Benoa (Bali). Note that we have yet to incorporate income from potential future divestments into our model. 19

20 Figure 27. JSMR owns four standalone toll roads, three of which are still under construction Asset securitization. JSMR already utilized asset-backed securities (ABS, or Kontrak Investasi Kolektif Efek Beragun Aset/KIK-EBA) in 3Q17 through the securitization of its Jagorawi toll road Indonesia s oldest toll road and one of JSMR s mature toll road sections. Using ABS, JSMR can secure capital to fund projects by selling shares of future revenues from certain toll road sections. Encouraged by the success of the Jagorawi ABS (IDR2tr raised, 2.7x over-subscribed), JSMR plans to securitize additional mature toll road sections. Some of the sections under consideration include Jakarta Outer Ring Road (JORR), Purbaleunyi (Cipularang and Padalarang), Jakarta Inner Ring Road (JIRR; includes Cawang-Tomang-Pluit and Prof. Dr. Ir. Sedyatmo), and Jakarta-Cikampek. In FY17, these toll road sections generated approximately IDR5tr in revenue. According to our discussions with management, JSMR plans to securitize these assets within the next three to four years. Note that the ABS scheme does not increase JSMR s gearing, as it is recorded under other liabilities on the balance sheet. It will, however, still reduce JSMR s ICR, due to higher interest burden. Table 9. JSMR s asset-backed securities (ABS or KIK-EBA) Item Description Instrument KIK EBA Mandiri JSMR1 Surat Berharga Hak Atas Pendapatan Tol Jagorawi Proceed IDR2tr Tenors Five years Rating idaaa (Pefindo) Coupon 8.4% Coupon payment Quarterly Listing date August 31, 217 Listing Indonesia Stock Exchange 2

21 Figure 28. JSMR s asset-backed securities (ABS or KIK-EBA) scheme Contractor pre-financing (CPF). JSMR utilizes the CPF toll road construction funding scheme for a number of its projects. Under the CPF scheme, JSMR pays all construction costs to contractors only after the construction process is completed. This scheme provides extra time for JSMR to free up capital. JSMR has seven projects utilizing the CPF scheme: Semarang-Batang, Cengkareng- Kunciran, Kunciran-Serpong, Balikpapan-Samarinda, Jakarta-Cikampek II elevated, Serpong-Cinere, and Bogor Outer Ring Road (BORR). Management is also considering utilizing the CPF scheme for the Manado-Bitung project. We estimate that total construction costs for JSMR projects under CPF will reach IDR3tr in FY18-2F (assuming construction costs amount to 9% of total toll road investment value), accounting for around 32% of our capex estimate for FY18-2F. Trans-Java sub-holding company In June 217, JSMR and Waskita Toll Road (WTR, a subsidiary of Waskita Karya; WSKT/Hold/IDR2,13) signed a JV agreement to form a Trans-Java sub-holding company called Jasamarga Transjawa Tol. JSMR holds a 65% stake in Jasamarga Transjawa Tol, while WTR owns the remaining 35%. Through the formation of this sub-holding company, JSMR and WTR aim to increase operational efficiency and facilitate the capital raising process. 649km or 14 toll road concessions are placed under the subholding company, consisting of 1 JSMR s concessions 4 WTR s concessions. Four of the 1 JSMR concessions included in the sub-holding company are mature toll roads: Jakarta-Cikampek, Semarang, Palimanan-Kanci, and Surabaya-Gempol. Meanwhile, the WTR concessions included are Kanci-Pejagan, Pejagan-Pemalang, Pemalang-Batang, and Pasuruan-Probolinggo. WTR has publicized its intention to divest these toll road sections. The government has stated that it would prefer for JSMR to be the majority owner of all Trans-Java toll road sections, which leads us to believe JSMR will arrange a means to buy the remaining sections from WTR, if the price is right. The scheme currently under consideration would entail JSMR buying 49% stakes in all WTR-owned Trans-Java toll roads, with financial institutions purchasing the remaining shares. JSMR would have the option to either 1) buy back the shares from these financial institutions at agreed prices or 2) conduct IPOs. Considering the relatively long payback period of toll roads outside Greater Jakarta and JSMR s tight capital capacity, we think the second scenario is more likely to materialize. Management believes that controlling the Trans-Java sub-holding company would allow JSMR to improve operational efficiency and potentially expand Trans-Java routes in the future. Note that management believes a deal can be struck in 1H18. 21

22 Table 1. Toll sections included in Jasamarga Transjawa Tol Toll section Length (km) JSMR's share (%) WTR's share (%) Jakarta-Cikampek Palimanan-Kanci Batang-Semarang Semarang section A,B,C Semarang-Solo Solo-Ngawi Ngawi-Kertosono Surabaya-Mojokerto Surabaya-Gempol Gempol-Pasuruan Kanci-Pejagan Pejagan-Pemalang 58-1 Pemalang-Batang 39-6 Pasuruan-Probolinggo 31-8 Total 741 Greater Jakarta sub-holding company According to management, JSMR is considering forming a Greater Jakarta sub-holding company in the future. Possible routes might include Jakarta Outer Ring Road (JORR) 1, JORR 2, Bogor Outer Ring Road (BORR), and Jakarta Inner Ring Road (JIRR). However, JSMR currently has no plans to form a Trans-Sumatra sub-holding company. 22

23 3/13 5/13 7/13 9/13 11/13 1/14 3/14 5/14 7/14 9/14 11/14 1/15 3/15 5/15 7/15 9/15 11/15 1/16 3/16 5/16 7/16 9/16 11/16 1/17 3/17 5/17 7/17 9/17 11/17 1/18 1/13 3/13 5/13 7/13 9/13 11/13 1/14 3/14 5/14 7/14 9/14 11/14 1/15 3/15 5/15 7/15 9/15 11/15 1/16 3/16 5/16 7/16 9/16 11/16 1/17 3/17 5/17 7/17 9/17 11/17 1/18 March 6, 218 Valuation Initiate with Trading Buy and TP of IDR6,1 We initiate our coverage on JSMR with a Trading Buy recommendation and a 12-month target price of IDR6,1/share. Our target price was derived using a discounted cash flow (DCF) methodology, assuming 9.7% WACC, 6.5% risk-free rate, 5.5% market risk premium, beta of.9, and 3.% terminal growth rate. For FY18F, we estimate revenue (excluding construction) of IDR1.5tr (+16% YoY), EBITDA of IDR5.4tr (+5% YoY), and net profit of IDR1.2tr (-46% YoY). Meanwhile, we anticipate debt-toequity ratio of 1.8x (up from 1.5x in FY17) and ICR of 2.7x (down from 5.2x in FY17). All in all, we believe JSMR s expansion is likely to bear fruit in the long run, as new toll road construction will drive revenue growth in the coming years. Due to the scale of the expansion, however, there could be challenges in the short term, as financing remains a major hurdle for the company. Still, given support from the government along with solid financing plans, lower cost of capital, and prudent cost controls, we believe JSMR possesses promising long-term upside potential. Key risks to our call include: 1) unsupportive government regulations and/or interventions; and 2) higher-than-expected financing costs. Figure 29. JSMR s share price performance (IDR/share) 8, 7, 6, 5, 4, Source: Company data, Bloomberg, Mirae Asset Sekuritas Indonesia Research Figure 3. JSMR s EV/EBITDA band 17 EV/EBITDA +1 Std Dev -1 Std Dev +2 Std Dev -2 Std Dev Mean Source: Company data, Bloomberg, Mirae Asset Sekuritas Indonesia Research 23

24 (JSMR IJ/Trading Buy/TP: IDR6,1) Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (IDRbn) 12/16 12/17 12/18F 12/19F (IDRbn) 12/16 12/17 12/18F 12/19F Revenue 8,879 9,8 1,494 12,74 Current Assets Cost of revenue -4,23-3,772-4,826-5,454 Cash and Cash Equivalents 4,125 6,873 1,128 1,24 Gross profit 4,856 5,38 5,668 6,62 AR & Other Receivables 8,286 11,75 11,66 11,174 SG&A expenses ,152-1,369-1,72 Inventories EBIT 3,97 4,155 4,298 4,899 Other Current Assets EBITDA 4,786 5,16 5,427 5,914 Non-Current Assets Net Interest Income (Exp.) -1, ,41-2,99 Investments in Associates Forex Gain (Loss) Property, Plant and Equipment 885 1,36 1,826 2,95 Others Intangible/Other Assets 39,491 58,283 81, ,821 Net Gain from Inv in Associates Total Assets 53,5 79,193 96, ,633 Pretax profit 2,65 3,25 1,664 1,794 Current Liabilities Income Tax , AP & Other Payables 6,13 18,739 31,6 47,388 Minority Interests Short-Term Financial Liabilities Net Profit 1,889 2,2 1,198 1,316 Other Current Liabilities 12,252 5,93 7,116 9,575 Non-Current Liabilities Long-Term Financial Liabilities 15,695 29,444 3,337 4,82 Margin Other Non-Current Liabilities 2,839 6,391 7,96 9,577 12/16 12/17 12/18F 12/19F Total Liabilities 37,161 6,833 76,858 17,852 Gross Margin (%) Controlling Interests EBITDA Margin (%) Capital Stock 3,629 3,629 3,629 3,629 Operating Margin (%) Additional Paid in Capital 3,997 3,997 3,997 3,997 Net Margin (%) Retained Earnings 6,491 8,125 9,71 1,111 Non-Controlling Interests 2,66 3,262 3,914 4,697 Stockholders' Equity 16,339 18,359 19,958 21,781 Forecasts/Valuations (Summarized) 12/16 12/17 12/18F 12/19F P/E (x) P/B (x) Cash Flows (Summarized) EV/EBITDA (x) (IDRbn) 12/16 12/17 12/18F 12/19F EPS (IDR) Cash Flows from Op Activities 4,694 5,473 15,862 2,683 BPS (DR) 2,251 2,53 2,75 3,1 Net Profit 1,889 2,2 1,198 1,316 DPS (IDR) Depreciation Payout Ratio (%) Change in Working Cap 2,648 3,98 14,148 18,661 Dividend Yield (%) Others 27,468 37,112 5,91 69,218 Revenue Growth (%) Cash Flows from Inv. Activities -7,695-19,846-24,469-33,178 EBITDA Growth (%) Capex -7,568-19,52-23,163-31,393 Operating Profit Growth (%) Others ,36-1,785 EPS Growth (%) Cash Flows from Fin. Activities 3,82 17,121 2,862 12,67 Accounts Receivable Turnover (x) Change in Financial Liabilities 1,722 17,31 2,461 12,1 Inventory Turnover (x) Change in Equity 1, Accounts Payable Turnover (x) Dividends Paid ROA (%) Others ROE (%) Increase (Decrease) in Cash 81 2,748-5, Current Ratio (%) Beginning Balance 3,323 4,125 6,873 1,128 Net Debt to Equity Ratio (%) Ending Balance 4,125 6,873 1,128 1,24 Interest Coverage Ratio (x) Source: Company data, Mirae Asset Sekuritas Research estimates 24