Foto: Okezone)
Even though the increase in fuel prices is predicted to push up inflation and Bank Indonesia’s benchmark interest rate, Henry Tedja, capital market analyst at PT Mandiri Sekuritas, assesses that the impact is quite manageable for the business of telecommunications tower companies such as PT Dayamitra Telekomunikasi Tbk (MTEL) or Mitratel. This prediction is because MTEL has long-term contracts with telecommunications companies that have strong financial balance sheets, especially after consolidation in the industry.
“In terms of cost structure, the tower industry which is capital intensive also has relatively fixed expenses. This is reflected in the earnings before interest, tax, depreciation and amortization (EBITDA) margin of tower companies which is quite high in the range of 8096 including Mitratel. “Because of that, we see that the impact of rising fuel prices on company performance is relatively limited,” said Henry in Jakarta, Wednesday (7/9/2022).
Even so, Henry reminded that the increase in fuel prices could affect the company’s valuation or share price. Because the valuation of tower companies such as Mitratel tends to be inversely proportional to inflation or interest rates.
This is due to the relatively high leverage owned by tower companies. Nevertheless, Mitratel’s position is quite good considering its leverage level is below the industry average.
“As a result, an increase in inflation or interest rates will have an impact on shares in the telecommunications tower industry,” he said.
Henry estimates that in the short term, high inflation and rising interest rates will provide sentiment for Mitratel. However, he predicts that the company’s outlook will remain positive in the medium term, especially after the company acquired Telkomsel’s 6,000 towers.
“This will support the company’s revenue and EBITDA growth in the medium term. “We still recommend BUY for Mitratel shares with a target price of IDR 950 per share,” he said.
At the close of trading Monday (5/9/2022), MTEL’s share price was at IDR 800 or down 0.6% compared to Friday last week. However, in the last week, MTEL shares rose 1.27% and in the last 6 months they increased 3.23%.
According to Henry, Mitratel’s tower acquisition of 6,000 towers belonging to PT Telekomunikasi Selular (Telkomsel) will have a positive impact on the company’s performance, considering that these towers have a strategic location and value.
This acquisition is also faster than the initial target set, thus enabling the company to cross-sell these towers more quickly to other telecommunications companies such as Indosat Ooredoo Hutchison, XL Axiata, and Smartfren. “This will certainly improve Mitratel’s revenue and EBITDA growth outlook in the next 2 years,” said Henry.
Until the end of 2022, Henry projects that Mitratel will have the opportunity to record revenue and EBITDA growth of 11-13% annually (YoY). He believes that the acquisition of Telkomsel’s tower will have a more positive impact on Mitratel’s business in 2023 than in 2022, considering that this acquisition only occurred in the third quarter of 2022.
So the impact of leasing the new tower will only contribute for a few months this year. Apart from that, consolidation in the telecommunications industry will also affect tower demand this year. On the other hand, the fairly rapid growth in demand for fiber in the tower industry will certainly have a positive impact on Mitratel’s business.
“We see that there is room for the market to revise MTEL’s revenue and EBITDA targets for 2023 with the acquisition of these 6,000 towers,” he explained.
In the semester | In 2022, Mitratel managed to record a profit of IDR 891.54 billion, an increase of 27.23% compared to the same period last year of IDR 700.74 billion. This profit is in line with revenue which rose 15.48% to IDR 3.72 trillion. MTEL’s net profit grew strongly mainly from higher operating income in line with growth in the number of tenants and tower locations.
For your information, in early August 2022, Mitratel announced that it had signed a Sales & Purchase Agreement (SPA) for the takeover of 6,000 Telkomsel towers. The number of towers transacted far exceeds Mitratel’s inorganic action plan stated in the prospectus.
A total of 6,000 towers acquired by Mitratel from Telkomsel are in strategic locations spread throughout Indonesia, to support the acceleration of additional collocation potential and development of tower related business.
Mitratel has also prepared telecommunications infrastructure, including towers, fiber optic and power to tower spread throughout Indonesia, especially outside Java, which will make it easier for telecommunications operators and non-operators to utilize the most complete and integrated solutions they have by Mitratel.
