We maintain OVERWEIGHT on the telecommunications sector in view of several factors: a) telcos’ 2024/25 mobile data revenue could grow 8%/7% yoy, b) digital channels (penetration ranging from 29% to 55%) could help improve ARPU, c) telcos’ EBITDA growth could reach 8% yoy in 2024 and 4% yoy in 2025, and d) attractive valuation with many telcos trading at -1SD EV/EBITDA. Our top pick is EXCL (BUY/Target: Rp2,900).
Protelindo maintained growth at the upper bound of its 4-6% guidance again as improved FTTT performance helped offset the lower Tower revenue. Margins were lower YoY, but justifiably so as non-Tower contribution rose to 34% versus 26% last year.
Following similar efforts in Europe and LatAm we are launching coverage on the HY Telcos & Towers in EMEA & Africa. New names under coverage include Helios (also initiated on equity, pt GBp140), Axian Telecom and Liquid Intelligent. We also address IHS Towers (pt cut to US$ 6), VEON and Helios’ bonds.
The JCI rallied strongly in Aug 24, rising 10.7%. 5.0% of the return was due to the rupiah appreciation. The strong rally caused our portfolio to underperform despite our portfolio delivering a 7.6% increase. Over the past 10 years, the return of the JCI in September averaged -1.62%. Considering the 10.7% return of the JCI in Aug 24, it might be wise to be slightly defensive in Sep 24. Thus, add ICBP and TOWR. Our picks are ICBP, TOWR, BBNI, BMRI, BBRI, EXCL, CTRA, BBTN, CMRY, SIDO and JSMR.
The combined EBITDA of TLKM, ISAT and EXCL grew 5% yoy in 2Q24. ARPU of ISAT and EXCL rose 5% yoy and 6% yoy respectively, while the ARPU of TLKM’s subsidiary for the cellular business (Telkomsel) declined 10% yoy. During 2Q24, ISAT gained a little market share (based on EBITDA) among the top three telcos, partly because it managed to expand its EBITDA margin slightly (2Q24: 49% vs 1Q24: 47%). Maintain OVERWEIGHT with EXCL as our top pick.
IHS Towers has reported a solid set of Q2 results. Organic top line growth has seen a strong acceleration, driven by Nigeria, while margins improved nicely too. There was no new news regarding the strategic review. However, the company made a key announcement last week about the contract renewals with MTN Nigeria (HERE).
Both MTN Nigeria and IHS Nigeria have announced the renewal and extension of all their MLAs in Nigeria, including new financial terms. This development is materially positive for both companies in our view. This means all MLAs in Africa between MTN and IHS have now been renewed and extended. Separately, MTN has also announced the exit from Guinea-Bissau.
Mitratel reported better trends this quarter, supported by its Fiber and Tower operations (acquired 803 towers from PT Gametraco Tunggal in December 2023). EBITDA continue to rise ahead of revenue leading to improvements in margins again. Against consensus and guidance (high-single digit), 1H revenue (+7.7%) is in line while EBITDA (+10%) stays ahead.
GREATER CHINA Strategy Small-Mid Cap Monthly Reiterate BUY on Plover Bay Technologies. Sector Automobile Weekly: Sales of top 12 EV brands up 38% wow last week, in line. Maintain MARKET WEIGHT. Top BUYs: Geely, CATL and Tuopu. Top SELL: XPeng. INDONESIA Update Sarana Menara Nusantara (TOWR IJ/BUY/Rp745/Target: Rp890) Number of towers to jump 10% on a...
The impact on TOWR’s acquisition on IBST are as followed: a) TOWR’s number of towers jumping 10% on the acquisition of IBST, b) 24% yoy growth from FTTT and connectivity revenue, c) potential EBITDA of Rp700b on the acquisition of IBST (6% to our 2025 EBITDA), and d) Negative NPAT from IBST might lower TOWR 2025 NPAT. We lower our target price from Rp1,200 to Rp950 as the stock has derated and it might be difficult to reach the Rp1,200 target price. Maintain BUY.
The outperformer this quarter was China Tower, with stronger trends across the board. Indus continues to grow at a faster pace, but we think the market is too optimistic on Indus’ ability to turn this into cash as it is driven by single tenancy towers. In Indonesia the big news is that XL and Smartfren are in talks which has the potential to be significant for both TBIG and TOWR, and so despite better trends we downgrade price targets
Telkomsel utilised its CVM programme to raise its data pricing in Apr-May 24. This includes a seasonal price hike (around 3-5%) during Eid al-Fitr in 2024, when demand for data services was higher vs normal days. EXCL recently launched a new data package BP with localised offerings (37-50% of total quota). We still expect a slight positive seasonal impact from Eid al-Fitr on telcos’ 2Q24 performance. Maintain OVERWEIGHT on the sector with XL Axiata as our top pick.
GREATER CHINA Economics Trade May exports grew 7.6%; imports moderated. Sector Property Property prices further drop after 17 May 24 policy combo; effective implementation of policies crucial for market stabilisation. INDONESIA Sector Telecommunications Pos...
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