PT Dayamitra Telekomunikasi Tbk (MTEL) or Mitratel’s acquisition of 6,000 towers belonging to PT Telekomunikasi Selular (Telkomsel) is predicted to have a positive impact on MTEL’s performance. Because this transaction could encourage organic growth in Mitratel’s performance this year and next year.
Equity Research Analyst PT BCA Sekuritas Mohammad Fakhrul Arifin said Mitratel’s acquisition of the Telkomsel tower with a transaction value reached IDR 10.28 trillion. In this transaction, an agreement was also agreed to lease back 6,000 towers from Mitratel to Telkomsel, Telkomsel’s commitment to order 1,000 BTS from Mitratel in the next 3 years, as well as the lease of 712 land owned by Telkomsel where the towers are located.
“We see that this acquisition will be a positive thing for Mitratel’s performance prospects. “This acquisition requires around 73.4 percent of our projection for Mitratel’s capital expenditure in 2022. It should be noted that the rental ratio for the acquired tower reached 1 times because previously this tower was exclusive only to Telkomsel,” said Fakhrul in a statement, Wednesday (31/8) .
Fakhrul assesses that Mitratel has a strong capital structure with a large capital expenditure allocation of IDR 14 trillion. This strong capital can encourage Mitratel to expand the company’s scale and foster organic and inorganic expansion. According to him, having a total of more than 34,800 towers and 49,900 tenants implies a 1.43x collocation ratio. This reduction is basically logical in our view, considering that the towers obtained from the previous acquisition were only used by Telkomsel.
“Because this transaction will ultimately encourage growth in the company’s value, thereby providing additional growth potential of around 2-3 percent, according to the company’s latest predictions and in line with our estimates,” he said.
From the operational side, according to Fakhrul, the impact of the Telkomsel tower acquisition transaction will be seen in Mitratel’s performance in the fourth quarter of 2022 and projected performance for 2023. Although it could later impact non-organic performance ratios, he predicts that the main driver of Mitratel’s growth in the first semester of 2022 will be from organic segment that has the potential to grow healthier and increase the collocation ratio.
“Therefore, we are changing our projected outlook for Mitratel’s colocation ratio to 1.46x and 1.5x in 2022 and 2023,” he explained.
BCA Sekuritas provides a buy recommendation for MTEL shares with a target of IDR 950 per share. The share price target takes into consideration the average annual growth (CAGR) of Mitratel’s revenue in 2021-2023 which is predicted to be 12.2 percent and the company’s income before deducting interest, taxes, depreciation and amortization.
(EBITDA) 14.2 percent in the same period. That implies an EV/EBITDA of 13.4x. MTEL’s share price at the close of trading Friday (26/8/2022) was at IDR 795 per share. In the last week and 6 months, MTEL’s share price has skyrocketed 15 percent, and in the last year, it has shot up 30 percent.
Semester-I 2022 Performance
In his research, Fakhrul revealed that MTEL posted a net profit in the first semester of 2022 worth IDR 892 billion or growing 27 percent annually. MTEL’s strong net profit growth mainly came from higher operating income in line with growth in the number of tenants and tower locations.
“The company has managed to maintain its leverage position at a healthy level, well below its debt covenants. Even though MTEL’s acquisition plan may require large capital, we see that the company will not need a lot of debt. “Because the company still has enough funds from the IPO,” he explained.Fakhrul believes the need for fiber optics is very important amid digitalization. Mitratel has realized 89 percent of its fiber optic target in 2022, the company could gain profits in the 5G network era. “In the future, healthier growth momentum after consolidation should be guaranteed,” he said.
