RHB Indonesia - Centratama Menara Indonesia - Company Visit Takeaways Unknown Senin, 07 Agustus 2017




Good morning,

Centratama Menara Indonesia – Company Visit Takeaways

A small tower company with high EBITDA growth rate, cheap valuation, and low gearing (Market cap: IDR3trn).

¨ CENT is an integrated telco tower company that offers both in-building and outdoor coverage solutions, as well as an Internet service (“ISP”) provider for corporates.
¨ Historically, CENT was a pure play ISP provider, it was acquired by NorthStar (current 41.8% ownership) in 2013 and started its tower business and subsequently, acquired the indoor coverage business in early 2017.

¨ Current revenue contribution is 60% indoor solutions and 35% tower business but its tower business will be the growth driver going forward. The unique proposition to CENT is its ability to offer both indoor and outdoor coverage solutions for any new built orders. TBIG IJ (Neutral, TP: 5,700) and TOWR IJ (Buy, TP: 4,700) do not has indoor coverage offerings, its top 3 tower clients are Telkomsel, XL and Hutchison Tri.
¨ High tower past 3 years CAGR of 47.6% with low net debt/EBITDA ratio of 0.3x, as of 1Q17, CENT has about 850 towers in their portfolio, it has secured another 500 new built orders, which will translate into a single year growth rate of 63%. Beauty of tower business is certainty of future cash flows and hence, tower companies are normally highly geared but traded at expensive valuation.
¨ CENT as an attractive alternative in the tower co sector, it is currently trading at last quarter annualized EV/EBITDA of 6.0x and 1 year forward EV/EBITDA of 4.0x compared to TBIG’s FY17 EV/EBITDA of 13.0x and TOWR’s 10.0. Furthermore, its net debt / EBITDA of 0.3x is supportive of its high growth rate. This is compared to TBIG’s 5.0x and TOWR’s 1.5x.
¨ Takeover target of both foreign/local tower conglomerates, given Northstar’s active management style and value creation track record. (Norman Choong, CFA)

Link to daily report: Indonesia Morning Cuppa 070817

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Best regards,

Helmy Kristanto
Director
Head of Indonesia Research
PT RHB Sekuritas Indonesia

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