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Tower Bersama Infrastructure

Tower Bersama Infrastructure

Telco NS EW RK 752 5th Aug, 2024

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1H24 – On firmer footing


TBIG has released its 1H24 results. Headline 1H24 profit of IDR731bn (+6% y-y) came in slightly behind our FY24F projection. This was largely due to higher financing costs. However, at the core operating level, overall results were in line with our projections. In the coming quarters, we expect core EBITDA should see a recover, owing to: 1) lesser impact from mergers of telecom operators; 2) no more impact from spectrum refarmings by key telecom companies; 3) the impact of rental repricing from recent contract renewals being behind us; and 4) interest rates probably already at their peak. For these reasons, we think Indonesian tower cos should see better earnings recovery trajectories. Post results, we retain our Buy rating on the stock with TP of IDR2,300.

1H24 result summary

  1. 2Q24 revenue reached IDR1.7tr (+0.3% q-q; +3% y-y); bringing 1H24 rev to IDR3.4tr (+4% y-y). This accounts for 50% of our FY24F revenue estimates. Amongst key tenants, TBIG saw increased revenue from XL Axiata (EXCL IJ, Buy) – more than offsetting lower revenue from IOH (ISAT IJ, Buy).
  2. In terms of total tower sites, TBIG reported 23,327 sites (+2% q-q / +5% y-y). Total tenants rose to 42,177 (+1% q-q / +2% y-y). This brings implied co-location ratio to 1.81x (slight decline from 1.83x in 1Q24 / 1.88x in 2Q23).
  3. 2Q24 EBITDA reached IDR1.5tn (+0.4% q-q; +0.3% y-y) – bringing 1H24 EBITDA to IDR2.9tn (+3% y-y) – accounting for 50% of our FY24F projection. This implies EBITDA margin of 86.1% (a slight +10bp improvement q-q). This is ahead of our 1H24 margin assumption of 85.8%. We think with higher co-lo as well as increased economies of scales, margins could improve further in the coming quarters.
  4. 2Q24 profit was IDR381bn (+9% q-q; +7% y-y) – bringing 1H24 profit to IDR731bn (+6% y-y) – accounting for 48% of our FY24F projection.

Valuation and risks

We derive our TP of IDR2,300 based on a DCF-based model, assuming a risk-free rate of 6.2%, cost of debt (after tax) of 5.3% (6.0% earlier), cost of equity of 14.4%, equity risk premium of 7.4%, WACC of 8.2%, a terminal growth rate of 2.5%, and beta of 1.1x. On our TP, the stock would trade at a FY24F EV/EBITDA of 13.5x (compared to 12.5x at the current price). Downside risks include adverse macroeconomic developments, irrational competition leading to lower rental rates, lower-than-projected tower renewals, slower organic growth, higher opex trends and/or co-location, and/or difficulties in securing new sites to accommodate telecom operators' network expansions.


Fig. 1: TBIG P&L

 TBIG P&L IDRmn 1Q232Q233Q234Q231Q242Q24q-q %y-y %YTD 2024YTD 2023y-y %FY2024Fvs FY24F %
 Revenue 1,617,8561,662,0051,672,9761,687,8081,704,6651,709,6110.32.93,414,2763,279,8614.16,798,37050.2
       
 Cost of Revenues 430,844342,417597,042532,094464,568484,2014.241.4948,769773,26122.7  
 Gross profit 1,187,0121,319,5881,075,9341,155,7141,240,0971,225,410(1.2)(7.1)2,465,5072,506,600(1.6)4,885,17350.5
 Margin 73.4%79.4%64.3%68.5%72.7%71.7%  72.2%76.4% 71.9% 
 Operating Income 1,059,4101,103,4021,042,6101,028,6501,096,6291,077,724(1.7)(2.3)2,174,3532,162,8120.54,336,38650.1
 Margin 65.5%66.4%62.3%60.9%64.3%63.0%  63.7%65.9% 63.8% 
          0   
 EBITDA 1,394,6101,467,4481,424,1461,441,4461,465,1851,471,6290.40.32,936,8142,862,0582.65,832,27850.4
 Margin 86.2%88.3%85.1%85.4%86.0%86.1%  86.0%87.3% 85.8% 
              
 NP 332,000356,796429,594449,546349,842380,9568.96.8730,798688,7966.11,536,58847.6
Source: Company data, Verdhana research


Fig. 2: Revenue by operator

 Rev by operators IDRmn 2Q231Q242Q24q-q %y-y %YTD 2024YTD 2023y-y %
 Tsel 567,111567,353565,434(0.3)(0.3)1,132,7871,131,6170.1
 ISAT 480,242437,177438,3910.3(8.7)875,568968,550(9.6)
 EXCL 285,635316,979322,3981.712.9639,377565,53513.1
 Others 329,017383,156383,3880.116.5766,544614,15924.8
Total1,662,0051,704,6651,709,6110.32.93,414,2763,279,8614.1
 Rev by operators % 2Q231Q242Q23  YTD 2024YTD 2023 
 Tsel               34.1              33.3              34.1                  33.2                34.5 
 ISAT               28.9              25.6              28.9                  25.6                29.5 
 EXCL               17.2              18.6              17.2                  18.7                17.2 
 Others               19.8              22.5              19.8                  22.5                18.7 
 Total             100.0            100.0            100.0                100.0              100.0 
Source: Company data, Verdhana research


Fig. 3: Operational data

 Operational Data 2Q231Q242Q24q-q %y-y %
 Tenants 41,42841,81042,1770.91.8
 - Tower tenants 41,31841,69342,0610.91.8
 - Colocation ratio               1.88              1.83              1.81  
 Sites 22,13622,95523,3271.65.4
 Tower sites 22,02622,83823,2111.65.4
 Ave leasing IDRmn/mth               13.4              13.6              13.5(0.6)1.0
Source: Company data, Verdhana estimates

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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ANALYST CERTIFICATION
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Rating Table

Rating
Remains		Buy
Target price
Remains
IDR 2,300
Closing price
31 July 2024		IDR 2,000

Research Analysts

Indonesia Research Team


Nicholas Santoso
nicholas.santoso@verdhana.id
+62 (8170056575)

Erwin Wijaya
erwin.wijaya@verdhana.id
+62 (8113181902)

Raymond Kosasih, CFA
raymond.kosasih@verdhana.id
+62 (8121208888)

Tags: TBIGJK, TBIG IJ, TELECOMS, Nicholas Santoso, Erwin Wijaya, Raymond Kosasih
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