Tower Bersama, Towering Along, CLSA

TBIG’s 2011 results were solid with Core NPAT 13% better than our
expectations. While TBIG’s inorganic deal-making grabs the headlines –
the organic operational momentum should not be underestimated. TBIG
added 2,300 new tenancies in 2011 providing a strong platform for 2012
in addition to a strong pipeline of new builds. Finalisation of the ISAT
transaction is the game-changing growth driver. Factoring the deal into
our model we upgrade our target price to 3,850 implying 40% upside.


Solid set of 2011 results: +49% EBITDA growth
2011 revenues of Rp970bn came in-line with our bullish forecasts and were a
44% increase YoY. TBIG reported EBITDA of Rp764bn which was 2% above
our forecasts and a 49% increase YoY. EBITDA margins increased by 3ppt
from 76% to 79% underpinning the strong operating leverage. Reported NPAT
was 22% higher than our numbers growing by 45% YoY but after adjusting
for exceptional items, Core NPAT was 13% higher than our expectations.

Organic operational performance very impressive
While TBIG’s inorganic deal-making grabs the headlines – the company’s
organic momentum should not be underestimated. TBIG recorded total yearend
tenants of 7,002, a 48% increase YoY and 12% above our forecasts. This
puts the company in a very strong position even without factoring the ISAT
deal. The 2,273 increase in tenancies was a mixture of 1,764 new telecom
sites and 509 new co-locations. Given the strength of the company’s ability to
execute organically we upgrade our tenancy numbers in the coming years.

ISAT closure pending – game-changing growth driver
The upcoming closure of the ISAT transaction (US$406m to purchase 2,500
towers) is a game-changing transaction for the company. The transaction
multiple of EV/EBITDA of 8x and 9% ROIC is attractive - comfortably covering
the company’s cost of capital. The material value creation will occur from
ramping up the tenancy ratio on the new towers from the current 1.3 ratio.

Upgrading target price to factor ISAT. Run-rate very strong.
Factoring the ISAT deal we upgrade our target price to 3,850 implying 40%
upside. Valuations are attractive given TBIG’s growth profile. While reported
2012 financials will be distorted by ISAT (likely only 6 months financial
contribution) given 2H12 deal closure, on a pro-forma 2012 basis the stock
trades on a 12x EV/EBITDA. On a December 2012 run-rate EBITDA the stock
trades on 11x EV/EBITDA, a considerable discount to regional peers.

Download file : Indonesia TBIG 080312 Final