TransJamaican Highway (TJH US): Infrastructure Investment Analysis – March 9, 2025
Company Overview
TransJamaican Highway operates Jamaica's critical 50-kilometer East-West toll road network under a concession agreement extending until 2036. Currently trading at US$0.028, the stock offers a 7.5% dividend yield based on consistently growing toll revenues. With just over 11 years remaining on its concession, TJH continues to provide stable infrastructure exposure while serving as a vital transportation artery connecting Kingston with major population centers.
Financial Analysis & Recent Performance
TJH closed 2024 with annual revenue of US$63.5 million, representing 5.5% growth from 2023 and slightly exceeding analyst expectations of US$63.2 million. This performance was driven by 3.8% traffic volume growth and the successful implementation of a 4.2% toll rate adjustment in November 2024, which was in line with Jamaica's inflation rate.
The company's financial position improved throughout 2024, with the EBITDA margin expanding to 74.8% and the net profit margin reaching 22.3%. The Q4 2024 earnings release in February 2025 highlighted the successful refinancing of US$25 million in debt at more favorable interest rates, contributing to improved profitability expectations for 2025.
First quarter 2025 preliminary traffic data released last week indicates continued momentum, with January and February showing 4.1% year-over-year volume growth. Management guidance for full-year 2025 projects revenue of US$66.7-67.5 million, representing 5-6% growth over 2024.
Based on current performance and improving margins, TJH appears undervalued at its present US$0.028 share price, suggesting a fair value of US$0.033-0.037, representing an 18-32% potential upside. The current PE ratio of 9.5x remains below the 11-12x typically assigned to stable infrastructure assets with TJH's profile.
Forward Projections
Looking ahead from today's vantage point in March 2025, TJH is projected to maintain consistent 5-5.5% annual revenue growth through 2030, reaching approximately US$87 million by the end of this five-year window. This growth trajectory is supported by Jamaica's continued economic development, steady tourism expansion, and scheduled toll adjustments in 2026, 2028, and 2030.
Profitability metrics show continued improvement. Net margins are expected to expand from current levels of 22.3% to approximately 27.5% by 2030 as operational leverage improves and debt service costs decline following recent refinancing activities. This margin expansion supports projected EPS growth of 8-9% annually, potentially reaching US$0.0042-0.0045 by 2030.
Growth Catalysts
Tourism in Jamaica has fully recovered from pandemic disruptions, with 2024 setting a new record of 4.2 million visitors. The Tourism Ministry's recently unveiled "Jamaica 2030" strategic plan targets 5.5 million annual visitors by 2030, driving additional highway usage particularly on routes connecting Kingston to north coast destinations.
Urban development continues along the highway corridor, with the February 2025 groundbreaking of the 3,500-unit Portmore Heights residential development expected to add significant commuter traffic by 2027. The ongoing expansion of the Caymanas Economic Zone has already increased commercial traffic by 7% year-over-year in Q4 2024.
Operational efficiency improvements continue, with electronic toll collection now accounting for 52% of transactions, up from 45% in 2023. Management aims to reach 65% digital penetration by 2027, further reducing collection costs and improving traffic flow.
Industry Factors
Jamaica's economic development plan continues to prioritize infrastructure investment, with the Finance Ministry's January 2025 budget speech highlighting transportation networks as critical to reaching 3% sustained GDP growth targets. Vehicle ownership reached 202 vehicles per 1,000 population in 2024, continuing its steady upward trajectory and supporting baseline traffic growth.
The recently stabilized interest rate environment has benefited infrastructure operators like TJH, allowing for more favorable refinancing terms. However, persistent inflation pressures have increased maintenance costs, partially offsetting revenue gains from inflation-indexed toll adjustments.
Key Risks
With eleven years remaining on the concession agreement, attention is increasingly turning to the 2036 expiration. Management indicated in February's earnings call that preliminary discussions with the government regarding potential extension terms may begin in late 2026, representing a critical value driver for long-term investors.
Jamaica experienced moderate fuel price volatility throughout 2024, with prices peaking in August before moderating in Q4. This temporarily suppressed discretionary travel, though commuter traffic remained resilient. Future fuel price instability presents an ongoing operational risk.
The National Works Agency's February 2025 announcement of capacity improvements to alternative non-tolled routes could provide additional competition for certain segments, though historical patterns suggest limited impact on TJH's primary commuter and commercial traffic.
Long-Term Outlook
Looking from today's perspective in March 2025, TJH's three-year horizon to 2028 suggests revenue approaching US$78 million with net margins around 25.5%. By 2030, five years from now, revenue should grow to approximately US$87 million with 27.5% net margins, potentially supporting a 12-13x PE multiple as initial concession extension discussions progress.
The ten-year view to 2035 becomes increasingly dependent on concession renewal prospects, with revenue potentially reaching US$112 million but valuation scenarios diverging dramatically based on extension outcomes. Without extension, terminal value calculations would dominate by this point, likely compressing multiples to 5-7x. Conversely, a secured extension could maintain or expand multiples to 13-15x.
Based on current performance trends and assuming modest multiple expansion, TJH's fair value could reach US$0.048-0.058 by 2030, representing potential 11-16% annual returns including dividends.
Investment Conclusion
As of March 2025, TransJamaican Highway continues to demonstrate the reliable, income-generating characteristics that make infrastructure investments attractive in emerging markets. The stock's 7.5% dividend yield, supported by consistent cash flows and scheduled toll adjustments, provides a compelling income component while Jamaica's economic development drives modest capital appreciation potential.
The recent refinancing success and strong traffic performance through early 2025 provide increased confidence in near-term projections. For investors prioritizing income and moderate growth from proven infrastructure assets, TJH represents an attractive opportunity at current prices, with the primary long-term consideration being the concession extension decision point that will gradually come into focus over the next several years.
The stock remains particularly suited for investors seeking emerging market infrastructure exposure with strong income characteristics, with the 18-32% potential upside to fair value providing an attractive entry point for income-focused portfolios with a medium to long-term investment horizon.
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Disclaimer
The user Sean876 holds no position in JMSE:TJHUSD. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.