Expecting Better Outcome
Improved Performance in FY21
• In FY21, TBIG booked a revenue of IDR6.18 tn or increased +16.0% YoY with the EBITDA grew to IDR5.43 tn (+17.6% YoY) and net income of IDR1.55 tn (+53.4% YoY). This positive movement of financial performance was driven from the increase of towers towers to 20,578 units (+26.5% YoY) by both organic and inorganic means. This increase of towers consists of 20,466 telecommunication towers and 112 DAS networks. Furthermore, TBIG also had an increase in total leases to 39,088 units in FY21, making the tenancy ratio to be 1.90x. Therefore, TBIG booked the EBITDA margin of 87.9% in FY21.
• We estimate the revenue should be maintained at IDR6.76 tn or grew +9.4% YoY mainly supported by higher tenancy ratio and higher number towers. Meanwhile, from the operation cost, TBIG is more efficient hence translating to higher EBITDA margin by 89.3%. In addition, TBIG is projected to gain additional towers to 22,098 units (+7.4% YoY) with additional tenancies to 41,195 units (+5.4% YoY), thus making the tenancy ratio to be 1.86x.
Opening For Tender Offer Opportunity
• Provident Capital Indonesia planned to purchase TBIG’s treasury stocks for 1.03 bn shares or 4.52% of total shares within one year to March-23. From this tender offer, Provident will earn 26.81% ownership of TBIG from previous 23.28% ownership in the IDR3.38 tn worth of treasury stocks purchase.
• We are positive on TBIG’s earnings growth potential. Hence, the mid-teen EV/EBITDA multiples are attributed to the tower-co stable and steady earnings growth business models, which are still at a discount to US peer's valuations. The valuation gap provides a benchmark for further re-rating potential and opening up the opportunities from global tender offers.
Valuation and Recommendation: BUY at Target Price IDR3,550
We recommend BUY with target price of IDR3,550 (+16.4% upside) with FY22E PE of 37.4x and EV/EBITDA of 13x. Our target price is based on DCF valuation with 7.0% of WACC, 4.0% terminal growth, and 6.8% risk-free rate. TBIG is projected to gain positive momentum this year align with due to its positive financial performance in FY21 and the potential tender offer by Providence in 2Q22. The risks are: 1) competitive prices between its peers; 2) increased land rentals; 3) prone for natural disaster and vandalism; 4) increased tower rentals churn rate; 5) higher post-merger integration costs.
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