TOWR - 1Q23 earnings drops 14.8% qoq

TOWR (Sarana Menara Nusantara)'s 1Q23 net profit came in at IDR752 bn, declining 11.8% yoy/ 14.8% qoq, caused by higher cost of revenue on depreciation and maintenance costs as well as operational costs on G&A by 14.8% qoq. This was also reflected in higher cash cost 12.4% qoq. As a result, EBITDA margin contracted 193bps to 85.1% in 1Q23. Furthermore, net finance costs also increased 15.8% qoq in 1Q23 amid high interest rate environment, bringing cost of finance at 6.5%. TOWR's revenue also edged down 2.2% qoq/+9.4% yoy to IDR2.9 tn, dragged by declined tower revenue 4.0% qoq, whereas non-tower grew 2.8% qoq and as its contribution expanded to 14.5% to revenue in 1Q23. (Source : Company) Comment : The impact of mobile consolidation still clouded TOWR's 1Q23 performance as tower revenue continued to decline. This was also in line with negative net addition of tenants qoq and yoy in 1Q23, as well as under pressure lease rate/month by -3.7% qoq. However, tenancy ratio was still able to be maintained at 1.81x in 1Q23, or unchanged qoq as number of towers slightly decreased. Additionally, it is worth noting significant growth in revenue generating fiber by 99.7% yoy/8.4% qoq in 1Q23 to 162.3K kms that indicates the company's strategy to diversify away from tower, in line strong demand of fiberized tower from MNOs.