MTEL: Perfect recipe for quick wins

KBVS Update
16 August 2023

MTEL: Perfect recipe for quick wins
(Initiate with BUY, TP: IDR870)

MTEL is bestowed by its strong affiliation as a member of Telkom Group (TLKM) that should enable it to further unearth synergy value within the group.

Furthermore, MTEL should also benefit from its unique tower portfolio locations that centered in ex-Java areas (58% vs. 42% in Java), aligned with MNOs expansion strategy, especially non-incumbent players to enhance their presence outside Java areas. In addition, MTEL’s robust balance sheet that enables it to capture investment opportunities should put it ahead of competition, protecting MTEL against headwinds, including amid high interest environment and strong USD.

MTEL's 2Q23/1H23 revenue grew 0.9% qoq/10.0% yoy, supported mostly by tower-related business. Yet, tower leasing revenue edged down by 1.4% qoq in 2Q23 to IDR1.71 tn, due to delayed revenue recognition from EXCL, followed by lease revenue per tenant to IDR10.4mn/month in 2Q23.  

Tenancy ratio was up from 1.46x in 1Q23 to 1.49x thanks to net addition of 1,401 of tenants in 2Q23, while colocation growth was strong with 1,121 of additions qoq or much better than peers.

Management guides 11% revenue and EBITDA growth in 2023 (VS KBVS ‘23E of 9%/12.7% yoy) with additions of 4K and 1.5K or organic and inorganic tenants. Also, MTEL expects to add 13K kms of fiber this year.

We initiate coverage on MTEL with BUY with a target price of IDR870 per share, derived from a combination of DCF-based and EV/EBITDA multiple methods. We assign MTEL's EV/EBITDA at 11.5x or premium compared to weighted-average peers at 11.1x EV/EBITDA. Combining these two methods, our target price implies 10.6x EV/EBITDA or below +1SD 5-year historical mean.

Regards,
Devi Harjoto – KBVS Research Team

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