Tower Bersama Infrastructure

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

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).
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).
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.
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	1Q23	2Q23	3Q23	4Q23	1Q24	2Q24	q-q %	y-y %	YTD 2024	YTD 2023	y-y %	FY2024F	vs FY24F %
Revenue	1,617,856	1,662,005	1,672,976	1,687,808	1,704,665	1,709,611	0.3	2.9	3,414,276	3,279,861	4.1	6,798,370	50.2

Cost of Revenues	430,844	342,417	597,042	532,094	464,568	484,201	4.2	41.4	948,769	773,261	22.7
Gross profit	1,187,012	1,319,588	1,075,934	1,155,714	1,240,097	1,225,410	(1.2)	(7.1)	2,465,507	2,506,600	(1.6)	4,885,173	50.5
Margin	73.4%	79.4%	64.3%	68.5%	72.7%	71.7%			72.2%	76.4%		71.9%
Operating Income	1,059,410	1,103,402	1,042,610	1,028,650	1,096,629	1,077,724	(1.7)	(2.3)	2,174,353	2,162,812	0.5	4,336,386	50.1
Margin	65.5%	66.4%	62.3%	60.9%	64.3%	63.0%			63.7%	65.9%		63.8%
										0
EBITDA	1,394,610	1,467,448	1,424,146	1,441,446	1,465,185	1,471,629	0.4	0.3	2,936,814	2,862,058	2.6	5,832,278	50.4
Margin	86.2%	88.3%	85.1%	85.4%	86.0%	86.1%			86.0%	87.3%		85.8%

NP	332,000	356,796	429,594	449,546	349,842	380,956	8.9	6.8	730,798	688,796	6.1	1,536,588	47.6

Source: Company data, Verdhana research

Fig. 2: Revenue by operator

Rev by operators IDRmn	2Q23	1Q24	2Q24	q-q %	y-y %	YTD 2024	YTD 2023	y-y %
Tsel	567,111	567,353	565,434	(0.3)	(0.3)	1,132,787	1,131,617	0.1
ISAT	480,242	437,177	438,391	0.3	(8.7)	875,568	968,550	(9.6)
EXCL	285,635	316,979	322,398	1.7	12.9	639,377	565,535	13.1
Others	329,017	383,156	383,388	0.1	16.5	766,544	614,159	24.8
Total	1,662,005	1,704,665	1,709,611	0.3	2.9	3,414,276	3,279,861	4.1
Rev by operators %	2Q23	1Q24	2Q23			YTD 2024	YTD 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	2Q23	1Q24	2Q24	q-q %	y-y %
Tenants	41,428	41,810	42,177	0.9	1.8
- Tower tenants	41,318	41,693	42,061	0.9	1.8
- Colocation ratio	1.88	1.83	1.81
Sites	22,136	22,955	23,327	1.6	5.4
Tower sites	22,026	22,838	23,211	1.6	5.4
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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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 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

Tower Bersama Infrastructure

1H24 – On firmer footing

Fig. 1: TBIG P&L

Fig. 2: Revenue by operator

Fig. 3: Operational data

Rating Table

Research Analysts

Indonesia Research Team

yudi Administrator

Indonesia towers - Back to growth path

XL Axiata EXCL IJ -Buy - Solid 1H24 operating results

XL Axiata EXCL IJ - Buy - Escaping the decade of doldrums

XL Axiata EXCL IJ -Buy- Clearer merger path

XL Axiata - EXCL IJ - Buy - FTTH a revenue driver

Indonesia Telecom - Bottoming ARPUs

Tower Bersama Infrastructure

Fig. 1: TBIG P&L

Fig. 2: Revenue by operator

Fig. 3: Operational data

Indonesia Research Team

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