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Tower Bersama Infrastructure (TBIG IJ) (Neutral) - Cut FY25F earnings by ~13.6%

Tower Bersama Infrastructure (TBIG IJ) (Neutral) - Cut FY25F earnings by ~13.6%

Telco EW 92 16th Apr, 2025

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Cut FY25F earnings by ~13.6%

Downgrade to Neutral, with reduced TP of IDR2,175 (from IDR2,300)

We turn conservative in our estimates; downgrade to Neutral

We remain positive on the tower sector’s long-term outlook (given rising data traffic). However, in the near term, we view the sector’s competitive dynamics as less favorable compared to the telecom sector, which could benefit from healthier pricing dynamics. Hence, we adopt a conservative stance in our earnings estimates for TBIG, reducing our FY25F earnings estimates by ~13.6% and introducing FY26F and FY27F estimates. We downgrade our rating to Neutral (from Buy) and cut TP to IDR2,175.

Limited catalysts in FY25F

We believe there are limited catalysts for the tower sector in FY25F. In particular, we anticipate a delay in growth of organic tenancy in 2025F due to a potential spectrum auction for the 700MHz band. This suggests that operators that win the auction are less likely to increase their tower tenancies. The 700MHz band has a lower frequency, which implies that it can cover wide areas with fewer base stations and can penetrate more number of buildings effectively. This makes the 700MHz ideal for both urban and rural areas. Hence, we believe that a recovery in organic tenancy is likely to be pushed to the end of FY25F/early FY26F, as operators fully utilize their spectrum holdings.

Valuation and risks

We derive our new TP of IDR2,175 based on the DCF model, assuming a risk-free rate of 6.2%, cost of debt (after tax) of 5.3%, cost of equity of 14.4%, equity risk premium of 7.4%, WACC of 7.9% (8.2% previously), a terminal growth rate of 2.5%, and beta of 1.1x. At our TP, the stock would trade at FY25F EV/EBITDA of 13.9x (compared to 13.5x at the current price). We cut FY25F EPS due to lower earnings projections, as we do not see any catalysts for the sector. Our TP implies 12.4% upside; given the limited upside potential from current levels, we downgrade our rating to Neutral. Upside risks include surging demand for mobile data, entry of new tenants, favorable regulatory changes, inflation-linked lease escalations, and opportunities from M&As or geographical expansion. Downside risks include adverse macroeconomic developments, irrational competition leading to lower rental rates, lower-than-expected 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.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
Revenue (bn)6,8676,9886,95607,19607,250
Reported net profit (bn)1,3621,6461,42201,68001,715
Normalised net profit (bn)1,3621,6461,42201,68001,715
FD normalised EPS60.1072.6562.7474.1575.68
FD norm. EPS growth (%)-12.77.14.418.22.1
FD normalised P/E (x)32.2–30.8–26.1–25.6
EV/EBITDA (x)13.3–13.5–13.1–13.1
Price/book (x)4.4–4.2–3.9–3.7
Dividend yield (%)2.7–2.3–1.9–2.3
ROE (%)12.513.713.915.514.8
Net debt/equity (%)305.0260.5301.7284.3271.0
Source: Company data, Verdhana estimates



Key data on Tower Bersama Infrastructure

Income statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Revenue
6,641
6,867
6,956
7,196
7,250
Cost of goods sold
-1,902
-1,941
-1,946
-1,963
-1,966
Gross profit
4,738
4,926
5,009
5,233
5,283
SG&A
-504
-607
-696
-719
-727
Employee share expense
0
0
0
0
0
Operating profit
4,234
4,319
4,313
4,514
4,557
EBITDA
5,728
5,869
5,864
6,066
6,112
Depreciation
-1,494
-1,551
-1,551
-1,553
-1,555
Amortisation
0
0
0
0
0
EBIT
4,234
4,319
4,313
4,514
4,557
Net interest expense
-1,832
-2,017
-2,199
-2,115
-2,120
Associates & JCEs
0
0
0
0
0
Other income
-598
-825
-550
-550
-550
Earnings before tax
1,805
1,477
1,564
1,848
1,886
Income tax
-183
-54
-78
-92
-94
Net profit after tax
1,622
1,423
1,486
1,756
1,792
Minorities
-61
-61
-64
-76
-77
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
1,560
1,362
1,422
1,680
1,715
Extraordinary items
0
0
0
0
0
Reported NPAT
1,560
1,362
1,422
1,680
1,715
Dividends
-1,316
-1,170
-1,021
-853
-1,008
Transfer to reserves
245
191
400
827
707
Valuations and ratios
Reported P/E (x)
28.1
32.2
30.8
26.1
25.6
Normalised P/E (x)
28.1
32.2
30.8
26.1
25.6
FD normalised P/E (x)
28.1
32.2
30.8
26.1
25.6
Dividend yield (%)
3.0
2.7
2.3
1.9
2.3
Price/cashflow (x)
7.8
6.2
8.4
7.9
7.3
Price/book (x)
3.7
4.4
4.2
3.9
3.7
EV/EBITDA (x)
13.0
13.3
13.5
13.1
13.1
EV/EBIT (x)
17.6
18.0
18.3
17.7
17.6
Gross margin (%)
71.4
71.7
72.0
72.7
72.9
EBITDA margin (%)
86.3
85.5
84.3
84.3
84.3
EBIT margin (%)
63.8
62.9
62.0
62.7
62.9
Net margin (%)
23.5
19.8
20.4
23.3
23.7
Effective tax rate (%)
10.1
3.6
5.0
5.0
5.0
Dividend payout (%)
84.3
85.9
71.8
50.8
58.8
ROE (%)
14.0
12.5
13.9
15.5
14.8
ROA (pretax %)
9.6
9.4
9.4
9.7
9.5
Growth (%)
Revenue
1.8
3.4
1.3
3.5
0.8
EBITDA
1.2
2.5
-0.1
3.5
0.8
Normalised EPS
-4.7
-12.7
4.4
18.2
2.1
Normalised FDEPS
-4.7
-12.7
4.4
18.2
2.1
Source: Company data, Verdhana estimates
Cashflow statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
EBITDA
5,728
5,869
5,864
6,066
6,112
Change in working capital
40
1,252
-545
-450
-7
Other operating cashflow
-178
-54
-78
-92
-94
CF from operations
5,590
7,068
5,241
5,524
6,011
Capital expenditure
-3,217
1,458
-872
-1,085
-1,279
Free cashflow
2,374
8,526
4,369
4,439
4,732
Reduction in investments
470
0
0
0
Net acquisitions
0
0
0
0
0
Dec in other LT assets
-1,074
0
0
0
Inc in other LT liabilities
-1
0
0
0
Adjustments
0
0
0
0
0
CF after investing acts
2,374
7,921
4,369
4,439
4,732
Cash dividends
-1,316
-1,170
-1,021
-853
-1,008
Equity issue
923
-2,189
0
0
0
Debt issue
0
0
0
0
0
Convertible debt issue
0
0
0
0
0
Others
-2,146
-3,881
-3,465
-4,135
-4,140
CF from financial acts
-2,539
-7,240
-4,486
-4,988
-5,148
Net cashflow
-166
681
-117
-549
-416
Beginning cash
966
801
1,482
1,364
815
Ending cash
801
1,482
1,365
815
399
Ending net debt
29,214
30,492
31,363
31,912
32,328
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash & equivalents
801
1,482
1,364
815
399
Marketable securities
0
0
0
0
0
Accounts receivable
1,958
1,984
457
877
884
Inventories
539
244
244
244
244
Other current assets
1,959
1,165
1,668
1,785
1,804
Total current assets
5,258
4,874
3,733
3,721
3,330
LT investments
470
0
0
0
0
Fixed assets
35,923
36,002
36,793
37,795
38,988
Goodwill
390
440
440
440
440
Other intangible assets
0
0
0
0
0
Other LT assets
4,926
6,000
6,000
6,000
6,000
Total assets
46,966
47,316
46,966
47,957
48,759
Short-term debt
10,874
18,730
1,323
3,139
2,958
Accounts payable
197
146
146
148
148
Other current liabilities
4,187
4,425
2,856
2,943
2,962
Total current liabilities
15,258
23,301
4,326
6,230
6,067
Long-term debt
19,140
13,244
31,404
29,588
29,769
Convertible debt
0
0
0
0
0
Other LT liabilities
108
108
108
108
108
Total liabilities
34,506
36,652
35,838
35,925
35,944
Minority interest
647
668
732
808
885
Preferred stock
0
0
0
0
0
Common stock
2,021
1,510
1,510
1,510
1,510
Retained earnings
5,045
5,417
5,817
6,644
7,351
Proposed dividends
0
0
0
0
0
Other equity and reserves
4,748
3,070
3,070
3,070
3,070
Total shareholders' equity
11,813
9,997
10,397
11,224
11,931
Total equity & liabilities
46,966
47,317
46,967
47,957
48,760
Liquidity (x)
Current ratio
0.34
0.21
0.86
0.60
0.55
Interest cover
2.3
2.1
2.0
2.1
2.1
Leverage
Net debt/EBITDA (x)
5.10
5.20
5.35
5.26
5.29
Net debt/equity (%)
247.30
305.02
301.65
284.32
270.96
Per share
Reported EPS (IDR)
68.87
60.10
62.74
74.15
75.68
Norm EPS (IDR)
68.87
60.10
62.74
74.15
75.68
FD norm EPS (IDR)
68.87
60.10
62.74
74.15
75.68
BVPS (IDR)
521.39
441.22
458.89
495.39
526.58
DPS (IDR)
58.07
51.65
45.07
37.65
44.49
Activity (days)
Days receivable
62.3
105.0
64.0
33.8
44.3
Days inventory
111.4
73.8
45.7
45.3
45.2
Days payable
46.1
32.3
27.4
27.3
27.4
Cash cycle
127.6
146.5
82.3
51.8
62.1
Source: Company data, Verdhana estimates
Company profilePT Tower Bersama Infrastructure Tbk is an Indonesia-based company engaged in provisioning telecommunication infrastructure solution and services. The principal business of the Company and its subsidiaries is leasing space for antennas and other equipment for wireless signal transmission at tower sites and shelter-only sites under long-term lease agreements with telecommunication operators. It also provides telecommunication operators with access to its Distributed Antenna System (DAS) networks in shopping malls and office buildings in major urban areas. Its telecommunication sites, which are comprised of telecommunication towers, shelter-only sites and DAS networks, are primarily located in Java Island and Bali Island, Indonesia. Some of its subsidiaries are PT Telenet Internusa, PT United Towerindo, PT Tower Bersama, PT Tower One, PT Triaka Bersama, PT Metric Solusi Integrasi, PT Solusi Menara Indonesia, TBG Global Pte Ltd and PT Menara Bersama Terpadu.
Valuation MethodologyWe derive our TP of IDR2,175 based on a DCF-based model, assuming a risk-free rate of 6.2%, cost of debt (after tax) of 5.3%, cost of equity of 14.4%, equity risk premium of 7.4%, WACC of 7.9%, a terminal growth rate of 2.5%, and beta of 1.1x. The benchmark index for this stock is JCI.
Risks that may impede the achievement of the target priceRisks for TBIG include i) adverse macro trend (ii) lower renewal lease rates (iii) slower colo orders and iv) difficulties in securing new sites
ESGPT Tower Bersama Infrastructure Tbk is a provider of coverage solutions. The firm's primary business is leasing space for antennas and other equipment for wireless signal transmission to telecommunication operators. PT Tower Bersama's other services include network planning, land acquisition and site licensing, infrastructure design and construction, network installation and project management, network expansion rollouts, and ongoing servicing. A majority of the firm's revenue is generated in Indonesia.

Fig. 1: TBIG—P&L

 TBIG P&L IDRmn 4Q233Q244Q24q-q %y-y %YTD 2024YTD 2023y-y %
 Revenue 1,687,8081,712,5741,740,5491.63.16,867,3996,640,6453.4
    #DIV/0!#DIV/0!00#####
 Cost of Revenues 532,094498,764493,679(1.0)(7.2)1,941,2121,902,3972.0
 Gross profit 1,155,7141,213,8101,246,8702.77.94,926,1874,738,2484.0
 Margin 68.5%70.9%71.6%  71.7%71.4% 
 Operating Income 1,028,6501,066,9951,077,4081.04.74,318,7564,234,0722.0
 Margin 60.9%62.3%61.9%  62.9%63.8% 
    #DIV/0!#DIV/0!00 
 EBITDA 1,441,4461,466,5251,465,934(0.0)1.75,869,2735,727,6502.5
 Margin 85.4%85.6%84.2%  85.5%86.3% 
      00 
 NP 449,546436,586194,240(55.5)(56.8)1,361,6241,567,936(13.2)
 Operational Data 4Q233Q244Q24q-q %y-y %YTD 2024YTD 2023y-y %
 Tenants 41,22742,54642,7220.43.642,72241,2273.6
 - Tower tenants 41,10942,43042,6080.43.642,60841,10934.9
 - Colocation ratio                 1.84                1.80              1.79                  1.88                1.88 
 Sites 22,47523,68123,8920.96.323,89222,47547.3
 Tower sites 22,35723,56523,7780.96.423,77822,35747.8
 Ave leasing IDRmn/mth                 13.6                13.4              13.61.2(0.5)   
         
 Rev by operators IDRmn 4Q233Q244Q24q-q %y-y %YTD 2024YTD 2023y-y %
 Tsel 545,097580,080595,2152.69.2595,215545,0979.2
 ISAT 458,251430,338456,2486.0(0.4)456,248458,251(0.4)
 EXCL 312,547318,255306,075(3.8)(2.1)306,075312,547(2.1)
 Others 371,913383,901383,011(0.2)3.0383,011371,9133.0
Total1,687,8081,712,5741,740,5491.63.11,740,5491,687,8083.1
 Rev by operators % 4Q233Q244Q24  YTD 2024YTD 2023 
 Tsel                 32.3                33.9              34.2                  34.2                32.3 
 ISAT                 27.2                25.1              26.2                  26.2                27.2 
 EXCL                 18.5                18.6              17.6                  17.6                18.5 
 Others                 22.0                22.4              22.0                  22.0                22.0 
 Total              100.0             100.0            100.0                100.0              100.0 
Source: Company data, Verdhana research

 

Fig. 2: TBIG—earnings changes

Source: Company data, Verdhana estimates

 

Fig. 3: TBIG—valuation

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. 

GENERAL DISCLOSURE/DISCLAIMER 
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ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


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Rating Table

Rating
Down from Buy
Neutral
Target price
Reduced from IDR 2,300
IDR 2,175
Closing price
11 April 2025
IDR 1,935
Implied upside+12.4%
Market Cap (USD mn)2,611.2
ADT (USD mn)0.1


Source: LSEG, Verdhana
M cap (USDmn)
2,611.2
Free float (%)
39.5
3-mth ADT (USDmn)
0.1
(%)
1M
3M
12M
Absolute (IDR)
-11.2
-4.7
3.5
Absolute (USD)
-13.3
-8.1
-2.4
Rel to Jakarta Stock Exchange Composite Index
-6.9
7.0
17.5

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: TELECOMS, TBIG, TBIG JK, TBIG IJ, Erwin Wijaya
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