Syntax Literate: Jurnal Ilmiah Indonesia p–ISSN: 2541-0849 e-ISSN: 2548-1398
Vol. 9, No. 3, Maret 2024
ANALYSIS OF THE EFFECT OF
FUNDING STRATEGY ON THE COMPANY’S FINANCIAL PERFORMANCE AT PT JASAMARGA
TRANSJAWA TOL
Amri Sanusi, Eka Pria Anas
Universitas Indonesia, Depok, West Java, Indonesia
Email: [email protected], [email protected]
Abstract
This research aims to investigate the implications of funding strategies
employed by PT Jasa Marga and its subsidiary
PT Jasamarga Transjawa Tol on their financial
performance. With the Indonesian government's increased investment in toll road infrastructure,
Jasa Marga, a State-Owned Enterprise, has undertaken expansive endeavors, augmenting investments from IDR 24.8 trillion in 2018 to IDR 78.6 trillion by 2022. However, this escalation
in investment levels also brings forth
heightened liabilities, predominantly stemming from reliance on
debt, particularly bank loans, in addition to equity. Such
a scenario presents challenges in managing payment obligations and, if not handled
adeptly, could imperil Jasa Marga's financial performance. Consequently, strategies aimed at bolstering
the company's capital structure are slated for implementation
in 2023. This exploration aims to assess
how these financial strategies and the debt-equity
balance influence company value and
financial health, drawing on frameworks
like the Pecking Order Theory. It seeks to comprehend
the ramifications of internal and external financing on the company's
solvency, as measured by ratios such
as Debt Equity Ratio (DER),
Debt Ratio, and Interest Coverage
Ratio (ICR). The literature
review delves into various financial
strategies such as crowdfunding and Initial Public Offering (IPO), elucidating their motivations and repercussions on companies, with
a specific focus on aspects like
information asymmetry and changes in post-IPO performance. This research integrates
theories, practical strategies, and financial metrics to derive meaningful,
data-driven conclusions aimed at optimizing
capital structure and enhancing financial
stability. It offers valuable insights to stakeholders
and facilitates improved financial decision-making processes within the company.
Keywords : PT Jasa Marga, Financial
Performance, Funding Strategies, Debt Equity Ratio (DER), Interest Coverage
Ratio (ICR)
Introduction
To respond to the government's
initiative intending to construct 2,500 km of new toll roads by 2024, Jasa Marga, as a State-Owned
Enterprise (SOE) entity in the toll road industry sector, is proactively
involved in realizing the country's strategic agenda, bearing responsibility as
an investor and toll road manager. As of the end of 2022, Jasa
Marga has been granted concession rights for 1,527 km
of toll roads, with 1,161 km of them already in operation
Currently, the operational and
investment activities of toll roads by Jasa Marga are regulated through 8 branches; involving 15
subsidiaries and 5 joint venture entities. Of the total length of operational
toll roads, 715 km are part of new toll road segments managed by Jasa Marga through subsidiaries
and joint ventures since 2011. Concurrent with the increase in the total length
of managed toll roads, the investment value of Jasa Marga in toll road concessions have also experienced
significant growth, from IDR 24.8 trillion in 2018 to IDR 78.6 trillion at the
end of 2022, showing growth of IDR 53.8 trillion or 216%
However, the elevated level of
investment also has implications for increased liabilities, in conjunction with
the utilization of funding sources that are not solely derived from equity but
also from debt, especially bank loans. This situation poses challenges for Jasa Marga in managing its
payment obligations, particularly if management is not conducted efficiently,
which, in turn, can affect the financial performance of Jasa
Marga. Therefore, to maintain the stability of the
company's performance, Jasa Marga's
management in 2023 plans to implement a series of strategies to strengthen the
company's capital structure.
The strategy of reinforcing
capital structure is a corporate policy aimed at enhancing the company's value
through determining the optimal combination of funding sources, forming the
most efficient capital structure. By identifying the optimal composition of
capital structure for subsidiaries that are already operational and solvent, Jasa Marga intends to increase
the company's value. The analysis will focus on the subsidiary PT Jasamarga Transjawa Tol, which plans to issue bonds as part of its capital
structure strengthening strategy
Solvency ratios such as the Debt
Equity Ratio (DER), Debt Ratio, and Interest Coverage Ratio (ICR) will be key
measurement tools in this study to assess the company's ability to meet its
obligations and will be significant indicators of the influence of funding
strategies on Jasa Marga's
financial performance. An increase in the DER ratio from 1.97 in 2018 to 3.27
at the end of 2022, although still below the maximum policy of 5 times,
indicates that the adopted financing strategy needs further evaluation to
determine its long-term impact on the company's financial health
In this study, an in-depth
exploration will be conducted to examine how capital structure strengthening
strategies and the composition of funding sources affect financial performance
and Jasa Marga's ability to
fulfill its obligations, with the goal of providing meaningful and data-driven
recommendations for optimizing capital structure and financing strategies in
the future.
This research was initiated to
delve into and scrutinize the influence of funding strategies employed by PT Jasa Marga, particularly its
subsidiary PT Jasamarga Transjawa
Tol, on the company's financial performance. More
specifically, this research focuses on two main problem formulations. First,
what is the impact of such financing strategies in the context of increasing
liabilities and the utilization of bank loans? This involves a thorough
analysis of the company's decisions in managing and selecting funding sources
and their repercussions on the financial statement, primarily on liabilities
and financial obligations. Second, has the capital structure strengthening
strategy applied by Jasa Marga's
management, which involves determining the optimal combination of funding
sources, succeeded in creating an efficient capital structure and enhancing the
company's value? This aims to understand to what extent the applied strategies
are able to create added value for the company and its shareholders.
This study has several objectives.
The first is to analyze the influence of financing strategies on the company's
financial performance. This includes the evaluation of the effectiveness and
sustainability of the funding employed and its impact on the company's
financial stance. The second objective is to assess the effectiveness of the
capital structure strengthening strategy. This is done to measure how effective
the strategy is in creating a balanced and resilient capital structure, which
will ultimately contribute to the company's financial stability. The third and
final objective is the development of recommendations for the optimization of
capital structure and financing strategies. By analyzing the findings of this
study, it is hoped that strategies and recommendations can be formulated to
assist the company in making better financial decisions and creating optimal
value for stakeholders.
The assessment of financial performance requires the utilization of diverse financial metrics, including the Debt Equity Ratio (DER), Debt Ratio, and Interest Coverage Ratio (ICR). These particular metrics yield insights into a company's solvency and its aptitude to fulfill financial obligations. Through the meticulous analysis of these ratios, the impact of a company's leverage, specifically its reliance on debt, on its financial well-being becomes elucidated. This exploration concurrently underscores the imperative of maintaining a harmonious balance between risk and returns when devising optimal financing strategies, enabling a comprehensive understanding of the intricate interplay between different financial components and their subsequent implications on the company's financial stability and growth (Ye & Li, 2022 ) .
It is crucial to recognize that financing strategies exert a
bifurcated impact on a company. On the one hand, the incorporation of debt can
mitigate a company's tax liability as interest expenses are tax-deductible,
potentially catalyzing augmented cash flows and elevated company value. On the
contrary, disproportionate debt can amplify financial risk and culminate in
escalated bankruptcy costs. Recognizing these dual implications is essential
for prudent financial management, necessitating a balanced approach to
leveraging and strategic financial planning to optimize fiscal stability and
organizational value (Dharmayanti et al., 2023) .
The balance between equity and debt within a company's capital
structure has significant ramifications for its overall value. The Pecking
Order Theory suggests that companies have specific preferences in selecting
sources of financing, prioritizing internal financing first, followed by debt,
and lastly equity. This hierarchy of preferences is informed by the cost
efficiency and reduced informational asymmetry inherent to internal financing
compared to external sources. For some entities, fine-tuning the balance
between debt and equity is crucial to attaining an efficient capital structure
and to the reduction of the overall cost of capital, thus promoting optimal
organizational financial health and value enhancement (Rasheed et al., 2023) .
The Pecking Order Theory, introduced by Myers (1984), acts as a fundamental theoretical framework for this research. This theory posits that companies strive to curtail agency costs and information asymmetry through the careful selection of financing sources, adhering to a hierarchy of prioritizing internal financing, followed by debt, and ultimately, equity. The principles of the Pecking Order Theory will be utilized in this study to scrutinize PT Jasamarga Transjawa Tol's choices in financing strategies and evaluate their responses on the company's financial performance. This approach provides a nuanced understanding of the strategic financial decisions and their inherent implications on the organization's financial health and sustainability (Abban & Hasan, 2021) .
The concept of Value at Risk (VaR) may also be employed in this research, serving as a tool to quantify the financial risk inherent in PT Jasamarga Transjawa Tol's financing strategies. Utilizing VaR allows for the measurement of the company's financial risk extent, facilitating a deeper exploration into the company's risk tolerance and its subsequent discussions on financing decisions and overall financial performance. This method provides a nuanced perspective on the organizational risk landscape and its interplay with strategic financial maneuvers and organizational fiscal health (Ye & Li, 2022) .
The mentioned two studies shed light on aspects concerning financial strategies and their consequential impacts on corporate performance, serving as central themes in the thesis related to PT Jasamarga Transjawa Tol. This discussion seeks to offer nuanced insights into the intricate relationship between strategic financial planning and organizational outcomes, providing a foundational context for the deeper exploration of specific financial paradigms within the targeted organizational setting.
The initial study led by Zhuo Zhang probes the ramifications of strategic financial management on long-term organizational goals, specifically within the energy sector. It accentuates the importance of "Low Carbon and Green Growth," introducing that energy corporations frequently allocate priority to operational management, overshadowing crucial elements molded by strategic financial management. Crucial components such as cash flows and value-centric financing emerge as decisive influences in shaping a company's financial strategies, extending beyond its operational scope. This inquiry employs a factor load matrix to evaluate essential financial indicators, providing profound insights into the interaction of these elements with financial strategies in the energy domain. This meticulous approach illuminates the intricate dynamics between operational priorities and strategic financial considerations, enriching the understanding of their collective impact on organizational trajectories in the energy sector (Chen, 2018).
The amount of funds that must be prepared is the main reason for companies to choose external sources of funds that are in accordance with the financing expected by the company (Budiarti & Hidayati, 2015) . External funding decisions in the form of debt issuance to banks through Standalone or syndicated procedures are decisions that require a lot of consideration. The theory that can be used in discussing a good capital structure based on the source of funding is the Pecking order theory which is the most (Ariwibowo et al., nd) frequently used and quite influential capital structure theory. The theory developed by (Yıldırım & Çelik, 2021) explains the priority order of managers in determining the source of funding. The manager's preference is expressed in the order of funding sources starting from internal funding as the main source. Funding through bank credit needs to ensure the financial performance and business risks owned by the company.
Crowdfunding is one of the innovative funding strategies. Initially, crowdfunding aimed to fill the deficiency in alternative funding for small companies that had minimal or no achievements in their fields (Valančienė & Jegelevičiūtė, 2014) . The role of intermediaries is crucial because they determine these and other aspects of how the crowdfunding process is run. In a different study, an Initial Public Offering (IPO) is also carried out by companies to develop their business and in the implementation of certain projects (Izfs & Supriatna, 2019) . Various reasons and whatever the motive, the IPO implementation will have an impact on the company in terms of finance, accounting and operations (Pastusiak et al., 2016) . Most studies in literature generally focus on the reasons for abnormal returns and company performance after an IPO. Problems that often arise after a company goes public through an initial public offering are the phenomenon of information asymmetry and declining performance (Santoso et al., 2013). Moreover, this research aims toinvestigates the implications of funding strategies employed by PT Jasa Marga and its subsidiary PT Jasamarga Transjawa Tol on their financial performance.
This research is a case study that adopts a mixed-methods approach which includes qualitative and quantitative elements. The qualitative approach aims to understand social phenomena related to the influence of funding strategies on company financial performance. This qualitative approach was carried out through data collection using observation techniques, in-depth interviews and case studies.
Data obtained from a qualitative approach is then analyzed by reducing, categorizing and mapping the data into certain themes or patterns. The main goal of a qualitative approach is to not only collect data, but also to provide an in-depth understanding of the relationship between funding strategy and a company's financial performance.
Apart from a qualitative approach, this research also uses a quantitative approach. The quantitative approach involves calculating ratios related to the company's financial statements in long-term plans and using the company's existing data.
The qualitative method used in this research is through in-depth interviews with top management personnel, starting from the top level at PT Jasamarga Transjawa Tol. This qualitative approach helps in exploring management's views regarding the influence of funding strategy on the company's financial performance.
This mixed approach aims to provide a comprehensive understanding of the research topic, including the perspective of research subjects or informants as well as quantitative data analysis to measure the impact of funding strategies on company financial performance. Thus, this research integrates qualitative and quantitative elements to test hypotheses and achieve the stated research objectives.
Research data
This research uses various types
of relevant data to analyze the influence of funding strategies on the
financial performance of the company PT Jasamarga Transjawa Tol. The data used includes
the company's long-term plans, historical financial data, funding options used
by similar companies in Indonesia, and the results of interviews with key
parties such as the JTT Finance Director, JTT Regional Development Director,
Main Director, and Jasamarga Group Head of Corporate
Planning.
Data regarding a company's
long-term plans provides an understanding of ongoing projects and related
investment needs, so it can be used to identify the funding strategies that
have been adopted by the company. Additionally, historical financial data,
including relevant financial statements, interest rates, and inflation data,
helps in analyzing a company's financial performance over time.
This research also compares the
funding options used by similar companies in Indonesia to understand the extent
to which PT Jasamarga Transjawa
Toll's funding strategy is in line with commonly used industry practices.
Apart from written data,
interviews with key parties such as the JTT Finance Director, JTT Regional
Development Director, Main Director, and Group Head of Corporate Planning Jasamarga provide direct insight and views regarding the
influence of funding strategies on the company's financial performance.
By combining data from these
various sources, this research aims to investigate the relationship between the
funding strategy used by PT Jasamarga Transjawa Tol and the company's
financial performance. These data will be analyzed holistically to reach strong
conclusions based on empirical evidence.
Data processing
The data processing method in this
research is used to analyze the influence of funding strategies on the
financial performance of the company PT Jasamarga Transjawa Tol. Data processing
includes various relevant financial and analytical aspects, with additional
triangulation data processing to analyze data from interviews.
In the analysis process, first, an
evaluation is carried out on the company's ability to carry out investments and
cash flow projections. Data regarding cash needs is an important focus in
ensuring the smooth running of investments listed in the Company's Long Term Plan.
Next, financial ratios are
evaluated, both before and after implementing the funding strategy. The
financial ratios analyzed include liquidity ratios, profitability ratios,
activity ratios and solvency ratios. This ratio data is used to evaluate the
impact of funding strategies on financial performance.
Analysis of a company's cash
inflow and outflow is carried out to identify the effectiveness of the use of
funds and cash management in a certain period. This helps in understanding how
funding strategies affect a company's cash flow.
In addition, risks associated with
funding strategies are evaluated, including market risk, credit risk and
liquidity risk. This risk analysis helps in identifying potential problems that
may arise due to a particular funding strategy.
In the context of the company's
internal and external analysis, an evaluation of the market, company position
and business to be carried out is carried out. It helps in assessing the
effectiveness of company assessments by looking at competencies and competitive
advantages. Management opinions from majority shareholders are also used as a
basis for determining the company's future expectations.
Table 1. Interviews’ Results
Information |
Year 2016 |
Year 2017 |
Year 2018 |
Year 2019 |
Year 2020 |
Asset |
860,537 |
902.066 |
1,032,620 |
2,048,357 |
2,113,532 |
C- Liability |
22,636 |
54,297 |
196,813 |
271.131 |
345,052 |
Equity |
837901 |
847,769 |
835.808 |
1,777,226 |
1,768,480 |
Income |
151,391 |
174.103 |
199,363 |
284,229 |
289,918 |
Net Profit/ (Loss). |
5,616 |
9,868 |
(11,961) |
10,342 |
7,244 |
Finally, data from interviews with
key parties, such as the JTT Finance Director, JTT Regional Development
Director, Main Director, and Group Head of Corporate Planning Jasamarga, was processed using the triangulation method.
This means that data from interviews is compared and synchronized with other
data, such as financial data and ratio data, to ensure the validity and
validity of the analysis results.
By combining various data
processing methods, this research aims to comprehensively investigate the
influence of funding strategies on the financial performance of the company PT Jasamarga Transjawa Tol. These data are analyzed holistically to produce strong
and relevant findings to answer research questions.
Results and Discussion
Table 2. Jogja-Solo toll road development
funds
Eligibility: |
Information |
IRR |
18.11% |
NPV |
211,511,767,121 |
WACC Nov-22 |
17.69% |
Payback
Period (Year) |
14.0 Years |
Eligibility
on Equity |
|
IRR |
19.09% |
NPV |
239,920,511,476 |
WACC Nov-22 |
19.69% |
Payback
Period (Year) |
13.7 Years |
Table 3. Jogja-Solo toll road financial ratio
analysis
|
2022
|
2023
|
2024
|
2025
|
ROA
|
0.0%
|
-2.1%
|
-1.5%
|
0.3%
|
ROE
|
0.0%
|
-5.1%
|
-3.7%
|
0.8%
|
NPM
|
0.0%
|
-83.5%
|
-12.9%
|
1.7%
|
EBITDA
|
-
|
118
|
41,486
|
79,779
|
Discussion
Based on the financial analysis provided, it can be concluded that PT. Jasamarga Transjawa Tol (JTT) has experienced fluctuations in its financial performance over the 2022-2025 period. The use of internal cash as the primary funding source for business development has been JTT's strategy to mitigate financial risk.
During the 2016-2020 period, JTT made significant capital expenditures (capex), starting with a capital deposit from Jasamarga of IDR 646 billion in 2016. These funds were utilized for the development of rest areas and property development. The company's financial performance showed improvement, reflected in the growth of assets and equity, as well as positive revenue and net profit.
JTT's five-year plan indicates a focus on property development and rest area expansion. However, it is noteworthy that the cash needs for the development of the Jogja-Solo toll road section, which is the largest endeavor within the Jasamarga environment, reached 1.2 trillion Rupiah, while operational cash flow is still in deficit. Therefore, the use of parent company's capital deposit funds is necessary.
The development of the Jogja-Solo toll road section is anticipated to be JTT's main business focus in the coming years, with project feasibility indicators such as a favorable IRR and positive NPV. Nonetheless, JTT has adopted a policy to optimize internal cash and obtain bank loans with a debt-to-equity ratio (DER) of 60:40, indicating that the Jogja-Solo toll road section project still produces a good IRR and management believes that bank loans are the right choice.
Financial ratio analysis shows good results for the Jogja-Solo toll road section project's performance, despite significant declines in ROA, ROE, and NPM in 2023 and 2024. EBITDA shows a very significant increase in 2024 and remains high in 2025, indicating a strong potential for revenue from the project.
To support future business strategies, Jasamarga's Corporate Planning group suggests that IPO funding sources could be considered, provided that future business strategies have been confirmed and refocusing may be necessary. IPO preparation will involve financial and legal studies, and will require a strong equity story to attract investors, who will look for a favorable return on the equity they invest.
Conclusion
Despite challenges in the form of fluctuating financial performance, JTT has demonstrated an ability to manage risks through prudent use of internal cash and borrowing strategies. With a focus on the promising development of Jogja-Solo toll road section and the consideration of an IPO plan, JTT appears to be well-positioned for future growth and expansion.
Abban, AR, & Hasan, MZ (2021). The causality
direction between environmental performance and financial performance in
Australian mining companies - A panel data analysis. Resources Policy , 70
(May), 101894. https://doi.org/10.1016/j.resourpol.2020.101894
Amin,
M. Al, Pan, S., & Zhang, Z. (2022). Pavement maintenance and rehabilitation
budget allocation considering multiple objectives and multiple stakeholders. International
Journal of Pavement Engineering , 1–14.
https://doi.org/10.1080/10298436.2022.2027941
Arif,
F. (2013). A Decision Support Framework for Infrastructure Maintenance
Investment Decision-Making . https://doi.org/10.25148/etd.FI13120901
Badu,
E., Owusu-Manu, D.-G., Edwards, D.J., & Holt, G.D. (2013). Analysis of
Strategic Issues Underpinning the Innovative Financing of Infrastructure within
Developing Countries. Journal of Construction Engineering and Management ,
139 (6), 726–737. https://doi.org/10.1061/(asce)co.1943-7862.0000641
Dharmayanti,
N., Ismail, T., Hanifah, IA, & Taqi, M. (2023). Exploring sustainability
management control system and eco-innovation matter sustainable financial
performance: The role of supply chain management and digital adaptability in
the Indonesian context. Journal of Open Innovation: Technology, Markets, and
Complexity , 9 (3), 100119.
https://doi.org/10.1016/j.joitmc.2023.100119
Dirawati
Pohan, C., & Dwimulyani, S. (2017). Analysis of the Influence of Financial
Performance, Good Corporate Governance and Corporate Social Responsibility on
Company Value in Mining Companies on the Indonesian Stock Exchange. Trisakti
Master of Accounting Journal , 4 (1), 37–54.
https://doi.org/10.25105/jmat.v4i1.4986
Hardani,
et al. (2020). Qualitative and Qualitative Research Methods Book. In Repository.Uinsu.Ac.Id
(April Issue).
Herlinda,
S., Said, M., Gofar, N., Pratama, F., Sulastri, Inderawati, R., Putri, RII,
& Nurhayati. (2010). Research methodology. Sriwijaya University Research
Institute , 1–25.
Karyadi,
M. (2019). Analysis of the Management of Liquidity Ratios and Activity Ratios
on Financial Performance Assessment at PT. Selaparang Financial East Lombok
Regency (2014-2018). Journal of Sharia Accounting and Finance (ALIANSI) ,
Vol. 3 No. (2), 1–15.
Pramudya,
AA, & Wibowo, A. (2022). Ranking Risks of BOT Toll Road Investment Projects
in Indonesia Using Fuzzy Interpretive Structural Modeling. Construction
Economics and Building , 22 (4), 59–80.
https://doi.org/10.5130/AJCEB.v22i4.8091
Pujianti,
A., Rafika, AS, & Purba, EH (2023). Analysis of Liquidity and Solvency
Ratios on Company Financial Performance at PT Nippon Indosari Corpindo Tbk .
4 (2), 165–170.
Rajan,
R. G., & Zingales, L. (1995). What Do We Know about Capital Structure? Some
Evidence from International Data. The Journal of Finance , 50 (5),
1421–1460. https://doi.org/10.1111/j.1540-6261.1995.tb05184.x
Rasheed,
S., Adeneye, Y., & Kosnin, R. (2023). Sovereign wealth fund investments and
financial performance of target firms: The disciplinary role of debt in
political agenda theory. Heliyon , 9 (5), e15519.
https://doi.org/10.1016/j.heliyon.2023.e15519
Sugiyono.
(2013). Qualitative Research: Qualitative Research Methods. In EQUILIBRIUM
Journal (Vol. 5, Issue January).
Sugiyono.
(2017). Dlscrib.Com-Pdf-Book-Research-Methods-Sugiyono-Dl_1559a9Defdf5Ac42500C000D11189B31
.
Suryana.
(2010). Research methodology Practical Models of Quantitative and
Qualitative Research . 58.
Syahrul
Rahmadhan, R., Aji Priyanto, A., Financial, K., Kencana No, Jls., & South
Tangerang -Banten, P. (2021). JIMF (Scientific Journal of Management Keyword: Master
Of Management & Forkamma Prodi Unpam. Forkamma) , 4 (2),
176–191.
Syahza,
A., & Riau, U. (2021). Research Methodology Book, 2021 Revised Edition (September
Issue).
Wijaya,
DN (2021). The Influence of Interest Rates, Exchange Rates, Economic Growth,
Financial Performance, Funding Decisions, and Investment Decisions on Company
Value. Equator Journal of Management and Entrepreneurship (EJME) , 9 (1),
1–19. https://doi.org/10.26418/ejme.v9i1.45929
Ye,
W., & Li, M. (2022). Risk of declining company performance during
COVID-19–Spatial quantile autoregression based on network analysis. Computers
and Industrial Engineering , 173 (September).
https://doi.org/10.1016/j.cie.2022.108670
Zhang,
Z., & Cai, X. (2018). Analysis of Influence Factors on Corporate
Financial Strategy: A Case Study of a Public Energy Company . 56 (Febm),
293–297. https://doi.org/10.2991/febm-18.2018.66
Copyright holder: Amri
Sanusi, Eka Pria Anas (2024) |
First publication right: Syntax Literate: Jurnal Ilmiah
Indonesia |
This article is licensed under: |