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Sunday, May 8, 2011

Improved Profitability - Tower Bersama Infrastructure Tbk

by Indopremier Securities

TBIG acquired IndonesianTower on April 2010 and the acquisition has shown positive impact to the consolidated financial statement of TBIG. EBITDA margin in 1Q11 rose to 77.9% compare to 1Q10’s 74.9%, when IndonesianTower has not been taken over by TBIG. Now TBIG has more towers than last year and increase occupancy on existing towers has enhanced profitability. We maintain our BUY recommendation with target price of Rp 3,100, 27.8% upside.

Acquisition Improved Profitability

For the first three months in 2011, TBIG posted revenue at Rp 213.9billion with EBITDA and net profit at Rp 166.6billion and Rp 100.5billion respectively. Profitability was enhanced by last year IndonesianTower’s acquisition. EBITDA margin in 1Q11 rose to 77.9% compare to 1Q10’s 74.9%, when TBIG was minus IndonesianTower. Increase in tower sites and in tenancies on existing towers is behind this positive output. Additional one tenancy in a tower with 1 co-location ratio would double rental revenues while the operating expense only gets higher less than double, hence the profitability advances.

More built-to-suit tower in 2011, good for future profitability

In the 1Q11, there were additional 356 new tenants where 219 was built-to-suit towers and the rest was coming from co-location on existing towers. This has resulted in declining tenancy ratio 1.76 at end 1Q11 from 1.80 at the end of 2010. We expect that co-location will increase in line with the Government’s encouragement to telco operators

Maintaining Assumptions

We maintain our assumptions for TBIG’s valuation with target price of Rp 3,100, representing 27.8% upside. 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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