OMPANY_NOTES TBIG_Front Runner - Indopremier

PT Tower Bersama Infrastructure Tbk (TBIG) is one of the major independent tower companies in Indonesia that holds a competitive tower portfolio. Strong relationships with Indonesia’s largest telecommunication operators and a well-positioned and robust tower portfolio provide TBIG a buffer for competition with other tower companies. We initiate with a Buy call and TP of Rp 3,100, 39% upside.

Promising outlook of the tower infrastructure industry. Infrastructure sharing is increasingly becoming the optimum answer as Indonesian telecommunication companies continue to remain under pressure to boost profitability. According to Detecon, Indonesia mobile subscriber growth is expected to remain strong with anticipation to grow 9% CAGR from 2009 to 2014 and minutes of usage at 12% CAGR for the same period. Both aspects would fuel new tower demand and overall tower tenancy growth.

Front runner. We are sanguine on the prospect of tower industry, particularly on TBIG. We believe that to grow faster TBIG will actively participate in any tower acquisition opportunities. At end 2010, TBIG has managed around 4,700 tenancies, an increase of 149% YoY. With the current capacity we estimate an additional 140 tenancies per month or around additional 1,680 tenancies in 2011. Post 2011, we assume an increase of 5% YoY of monthly tenancies.

Appealing valuation. On the back of the foregoing, we estimate that TBIG’s revenue and EBITDA for 2011 of Rp 1,179bn and Rp 905bn, respectively, representing a 76% and 77% YoY growth. Higher co-location should improve its EBITDA margin. And using DCF and WACC of 11.3%, we derive the equity value for TBIG of Rp 14.1trillion or Rp 3,100/share, representing 39% upside. Currently TBIG is traded 14.9x FY11 EV/EBITDA and 11.5x FY12 EV/EBITDA, at the low end of international peers trading multiple. BUY