TOWR - Weak 2Q23 earnings on stubborn finance cost

TOWR's 2Q23 earnings rose 7.2% qoq to IDR807 bn, forming 1H23 net profit to IDR1.56 tn (-7.8% yoy), yet below ours/consensus at 42.3%/41.5%. Soft 2Q23 earnings was weighed down by higher OpEx +11.6% qoq. Despite flattish finance cost qoq, TOWR's CoF increased to 6.8% in 2Q23 vs. 6.5% in previous quarter. Amid higher cash cost +2.5% qoq/ 15.8% yoy in 2Q23, EBITDA grew barely 1.5% qoq. This resulted in EBITDA margin to contract from 86.0% in 2Q22 to 85.0%. However, TOWR's 1H23 EBITDA achieved 51.2%/50.9%, beating ours/consensus. Although, TOWR recorded a tepid growth of 2Q23 revenue of 1.6% to IDR2.1 tn, its 1H23 revenue topped ours/consensus by 1.3%/1.5%. (Source : Company, KBVS) Comment : TOWR's 2Q23 top-line has shown an improvent compared to previous quarter as tower revenue grew 3.5% qoq, ending negative growth in previous two quarters. This was despite soft operational metrics with tenancy ratio continue to drop to 1.8x in 2Q23 as it recorded 49 tenants churn. However, we note that TOWR managed to improve its lease rate to IDR13.2 mn in 2Q23 or +3.6% qoq. We are waiting for management's remarks during Aug 1 call.