EXCL - Trying to dive deeper

KBVS Update
Wednesday, 11 September 2024

EXCL - Trying to dive deeper
(Reiterate BUY - TP: IDR2,600)

Driving industry consolidation. The proposed merger of EXCL and FREN aims to consolidate the telecommunications industry, shifting the focus from price-based competition to customer satisfaction and operational efficiency.

The merger could make MergeCo worth 20% more. Our five-year DCF analysis indicates that the MergeCo could achieve an equity value of IDR52.4 tn (~USD3.4 bn), which is 20.2% higher than the combined standalone values of EXCL and FREN.

MergeCo’s outlook: expected increases in ARPU and EBIT margin. Based on the IOH merger cases, our conservative analysis of MergeCo's performance projects a gradual improvement in EBIT margin and revenue growth, with ARPU increasing steadily in the first two years.

Reiterate BUY with TP of IDR2,600, based on 2.6x 2024F EV/EBITDA (-1SD 7yrs-historical mean).

Regards,
Steven Gunawan - KBVS Research