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Wednesday, April 13, 2011

Tower Bersama Infrastructure Tbk

On Track

TBIG is on track to reach our 2011 target for tenancies and co-location. For the first quarter of 2011, TBIG has additional 356 new tenants, or reaching 21% of our 2011 target for new tenants (1,680 tenancies). On top of 4,729 tenants as of end 2010, by 31 March 2011 TBIG has managed 5,086 tenancies and 3,370 telecommunication sites in its portfolio. We maintain our target price of Rp 3,100, providing 33% upside. On the counter, TBIG is valued 15.5x FY11 EV/EBITDA and 11.9x FY12 EV/EBITDA. BUY

Ongoing Growth

The additional 356 new tenants for three months were behind our 2011 estimate of 420 tenants/3 months yet we believe that TBIG is on track to reach our year-end assumption. Although Indonesian cellular market faces stagnancy, the telecommunication industry sees another revenue driver. The cellular industry alone is expected to grow 10% YoY in 2011 or translate into additional 20 million subscribers. Assume that one BTS can handle 1,100 subscribers and to handle 20 million new subscribers, it will need around 18,000 BTS or the tower industry may expect 18,000 new tenants in 2011. On top of that mobile broadband internet service is showing an uptrend in recent years and telco operators is focusing on that service. The recent introduction of WIMAX service in Indonesia provides upside to tower industry since it would require BTS and tower infrastructure is involved in this.

More built-to-suit tower in 2011

Despite rising in tenancies, the tower tenancy ratio went down to 1.76 at end 1Q11 from 1.80 at the end of 2010. This is inline with our assumption that we expect co-location ratio to fall this year (See Stock Notes on 25 March 2011). We assume 65% of additional tenancies in 2011 will come from new tower (considering 600 new towers have already in the pipeline), and we estimate the blended co-location ratio will fall to 1.71 by end of 2011.

Maintaining Assumptions

We maintain our assumptions for TBIG’s valuation with target price of Rp 3,100, representing 33% upside. Currently TBIG is traded 15.5x FY11 EV/EBITDA and 11.9x FY12 EV/EBITDA. BUY




31 Dec (Rp Mn)

2009

2010

2011F

2012F

2013F

Revenue

341,376

671,360

1,179,323

1,519,111

1,862,820

EBITDA

256,727

512,760

905,572

1,172,931

1,451,727

Net profit

240,657

326,729

769,687

980,123

1,206,085

EBITDA margin

75.2%

76.4%

76.8%

77.2%

77.9%

EPS

52.8

71.7

168.9

215.1

264.7

BVPS

115.2

470.6

584.8

756.9

968.7

PE (x)

44.0

32.4

13.8

10.8

8.8

PBV (x)

20.2

4.9

4.0

3.1

2.4

EV/EBITDA (x)

54.7

27.4

15.5

11.9

9.7

Source: company, IPS calculation


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