Tower Bersama, FY11 results show a strong growth trajectory, though not quite as strong as we had forecast, Credit Suisse

● TBIG’s revenue grew 44.5% YoY for FY11 as a whole. EBITDA
rose 48.9% YoY and net profit grew 45.2% YoY. Even though this
represents a high growth rate, the result was less strong than we
had anticipated, and TBIG missed our FY11 revenue, EBITDA
and net profit forecasts by 20.9%, 22.0% and 33.4%, respectively.
● The FY11 figures flow through our model, and we have revised
down our FY12 and FY13 revenue forecasts by 7.3% and 4.9%,
respectively. Our EPS forecasts for FY12 and FY13 have been
revised down by 10.7% and 8.1%, respectively.
● On the other hand, we are still believers in the long-term growth
trajectory of TBIG. Indeed, we expect TBIG to report a doubling of
net profit into FY12 and 29.2% net profit growth into FY13.
● Our DFC-based target price has therefore only been revised down
by 3.4%, from Rp2,900 to Rp2,800. With only 1.8% upside from
current levels we believe TBIG is relatively fairly priced, and we
maintain our NEUTRAL rating relative to the JCI.


TBIG reported high growth rate QoQ and YoY...
TBIG has announced FY11 results. Revenue grew by 13.1% QoQ in
4Q11. Of course, the acquisition of Infratel’s (Not Listed) tower
portfolio, with a total of 672 tenants, contributed to growth as 4Q11
was the first full quarter in which Infratel’s results have been
consolidated.
Operational gearing continued to work in TBIG’s favour. While the
EBITDA margin was flat compared with 3Q11 at 79.1%, the margin
had expanded by 3.2 pp versus the 75.9% achieved a year ago in
4Q10. EBITDA was able to grow by 13.2% QoQ and 48.8% YoY.
EBIT grew by 12.7% QoQ and 46.6% YoY, and net profit grew by
44.6% QoQ and 37.5% YoY. Taking FY11 figures as a whole,
revenue was able to grow 44.5% YoY and EBITDA rose by 48.9%
YoY. Net profit grew by 45.2% YoY.

…but missed our relatively aggressive forecasts
Although FY11 figures demonstrated a high growth rate, the results
were less strong than we had anticipated, and TBIG missed our FY11
revenue, EBITDA and net profit forecasts by 20.9%, 22.0% and 33.4%,
respectively. This was partly due to a lower-than-expected tenancy
ratio, following the addition of large numbers of new towers (which
initially have a single tenant).
The lower-than-expected growth figures delivered in FY11 flow
through our model, and we revise down our FY12 and FY13 revenue
forecasts by 7.3% and 4.9%, respectively. Our EPS forecasts for
FY12 and FY13 have been revised down by 10.7% and 8.1%,
respectively.

Growth set to continue into FY12 and FY13
Despite these downward revisions to our forecasts, we expect the
strong growth trajectory to continue into FY12 and FY13, as TBIG
raises the tenancy ratio on its enlarged portfolio of towers. TBIG also
announced on 8 February 2012 that it was acquiring 2,500 towers
from Indosat. Given this acquisition, together with TBIG’s organic
growth trajectory (rising tenancy and on-going ‘own-build’ tower
construction), we believe TBIG can deliver 81.8% revenue growth
YoY into FY12, followed by 33.0% growth into FY13. As operational
gearing will likely continue to work in TBIG’s favour, we forecast a
doubling of net profit into FY12 and 29.2% net profit growth into FY13.

Medium-term prospects remain attractive
TBIG’s core business model is of course premised on the expectation
that the tenancy ratio on its enlarged tower portfolio should rise over
time. We believe there are strong drivers in this direction. High growth
in voice minutes of use (MOU), SMS volumes and particularly data
volumes in Indonesia continue to spur telecom service providers to
increase construction of base transceiver systems (BTS). This is set
to result in more towers being constructed and a higher ratio of BTS
per tower.
Government regulations (the March 2009 Joint Decree on Shared
Telecommunications Towers) actively encourage a rise in number of
BTS per tower. An important barrier to entry into the towers market
was also introduced in March 2008, when the Ministry of
Communications and Information issued a ministerial decree requiring
that “independent” tower providers must be 100% locally owned. This,
in our view, reduces the potential for competition to TBIG, and further
encourages rising tenancy ratios.
Target price trimmed to Rp2,800
We therefore maintain our long-term forecast that Tower Bersama’s
tenancy ratio can reach 2.20x by FY20, up from the current 1.6x on its
existing portfolio, and 1.4x on the towers acquired from Indosat. The
impact from the downward revisions to our FY12 and FY13 forecasts
is therefore limited. Our DFC-based TP is cut by 3.4% to Rp2,800
from Rp2,900; we maintain our NEUTRAL rating relative to the JCI.

Download file : TBIG 7 Mar 2012