Indonesian state-controlled toll road operator - yet listed on the Indonesia Stock Exchange - Jasa Marga considers to issue rupiah-denominated global bonds as an alternative source to seek funds for investment in toll road infrastructure development. Donny Arsal, Finance Director of Jasa Marga, said the company needs IDR 7 trillion (approx. USD $526 million) for investment in 2017. These funds should be collected through bonds, asset securitization, and bank loans.
Regarding bonds, Jasa Marga is not only interested in domestic corporate bonds but now also considers to sell rupiah-denominated global bonds in order to generate fresh funds from international investors. However, Arsal said the company is in the early stages of exploring this option and therefore it will not be realized soon. He also declined to give an indication about the face value of the bond.
Handy Yunianto, bond analyst at Mandiri Sekuritas, said the issuance of rupiah-denominated global corporate bonds have the opportunity to get a good response from investors. This assumption is based on the fact that there exists plenty of demand from foreigners for rupiah-denominated government bonds, implying that this investor community is already used to the potential currency risk. But an Indonesian company is not the same as the Indonesian government.
Thus there are several challenges related to the issuance of rupiah-denominated global corporate bonds. These include the credit risk and liquidity risk. Moreover these rupiah-denominated global corporate bonds are a new investment instrument in Indonesia. Therefore it is important the issuance is conducted by a listed company that has good credit ratings. State-controlled financial institution Bank Mandiri also recently stated that is considers to issue rupiah-denominated global corporate bonds.
Last month Pefindo affirmed its idAA rating for Jasa Marga, with a stable outlook, implying it has a very strong capacity to meet its long-term financial commitments. Being state-controlled Jasa Marga can rely on support from the central government when it comes to toll road development projects. For example, government support in the land acquisition process, possibly the most difficult obstacle in the toll road industry business. Furthermore, the government's direct investment in the non-commercially feasible areas on certain sections should be a positive catalyst for the completion of recent under-constructed toll roads.
Being state-controlled and being the dominant force in Indonesia's toll road business, steady toll revenue growth is driven by higher traffic volumes and regular tariff adjustments with strong profitability, and stronger financial flexibility. However, Jasa Marga's ratings are constrained due to its aggressive capital structure in the near to medium term and by business risks related to the development of new toll road projects.
Jasa Marga's net profit reached IDR 960.2 billion (approx. USD $72 million) in the first half of 2017, up 9.8 percent compared to net profit in the same period one year earlier. Meanwhile, its revenue surged by a whopping 95.1 percent (y/y) to IDR 13.1 trillion. These corporate earnings were released today and therefore its shares rose 2.82 percent to IDR 5,475 a piece. So far this year its shares have risen 26.74 percent.
Stock Quote Jasa Marga - JSMR: