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Thursday, August 11, 2011

Tower Bersama Infrastructure Tbk - Behind The Curve But Profitability Pick Up

by Indopremier Securities

We are a bit disappointed with TBIG’s 1H11 result since the top line and EBITDA accounted only 37% and 38% of our year-end estimates and 39% and 39% of consensus figure. Despite that, positive impact of last year acquisition has again improved EBITDA margin in 1H11 to 78.3% compare to 1Q11’s 77.9%. The acquisition of Infratel that has just been finalized (The Final Sale & Purchase Agreement has been signed on 9 August 2011) would immediately increase TBIG’s tenancies and revenues by more than 10%. We maintain our BUY recommendation with target price of Rp 3,100,-

Profitability remained sound

For the first half in 2011, TBIG posted revenue at Rp 440.5billion with EBITDA and net profit at Rp 344.7billion and Rp 166.7billion respectively. The 1H11figure was behind our estimates (37%, 38% revenue, EBITDA) and about similar percentage of consensus figure. Nevertheless, profitability remained sound with EBITDA margin rose to 78.6% in 2Q11 vs 1Q11’s 77.9% vs 76.8% of our year-end estimates. We believe last year Indonesia Tower’s acquisition was the key element for rising profitability.

Organic Growth Driven By Built-To-Suit Tower

During 1H11 there were additional 652 new tenants where 506 was built-to-suit towers and the rest was coming from co-location on existing towers. Co-location ratio was declining from 1.76 in 1Q11 to 1.71 in 2Q11 and this suggested that TBIG has more built-to-suit towers.

Infratel, Another Profitability Booster

The consolidation of Infratel will take place in 3Q11. The company claimed that the consolidation would increase TBIG’s tenancies and revenues by more than 10%. We have not factored in Infratel into our valuation since there is no available data. In term of operation, we noted that Infratel operates tower sites with low co-location ratio (1.29) and the consolidation will lower co-location ratio to 1.67, hence potential rising co-location ratio would again improve profitability.

Maintaining Assumptions

We lower the Gain on Property Valuation and causing the net profit falls by 20% from previous figure (Rp 610bn vs Rp 769bn), but it does not affect our valuation. We maintain BUY recommendation with target price of Rp 3,100, on the back of :1) Infratel’s acquisition and; 2) better profitability.

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