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EBITDA growth of +12.3% YoY in 3Q23. MTEL’s 3Q23 financial performance was quite solid, posting EBITDA growth of +14.0% YoY (+3.3% QoQ), which brought its 9M23 EBITDA growth to +74.9% YoY with an EBITDA margin of 80.6% (3Q23: 79.3%). Its 9M23 EBITDA was in line with SSI’s target but slightly below consensus (74.9% of SSI’s FY23F target and 72.6% of consensus). The company’s strong EBITDA performance was primarily driven by the addition of 986 tenants in 3Q23 (B2S: 373, colocation: 614), bringing the number of MTEL’s tenants to 55,704 in 9M23 (+10.5% Ytd) with a tenancy ratio of 1.50x. However, its bottom line were below ours and cons (68.3% of SSI’s FY23F target and 67.7% of cons) mainly due to interest rate hike, which led to a spike in financial expense (+36.1% YoY).
Non-Telkom Group tenants as long-term growth drivers. MTEL’s 3Q23 revenue growth was mainly driven by non-Telkom Group tenants, especially ISAT and EXCL (MTEL's revenue from both of them rose +37.7% YoY and 40.4% YoY in 3Q23, while revenue from Tsel only rose +6.4% YoY). We believe that non-Telkom tenants will continue to support MTEL's revenue growth in the long term, given its relatively low tenancy ratio (1.5x), which opens up the potential for colocation, especially outside Java; to note, Bali, Kalimantan, and Sulawesi are currently MTEL’s fastest-growing operating areas, with tenant growth of more than +7% YTD.
FY23F and FY24F outlook. MTEL’s management kept its FY23F revenue and EBITDA growth guidance at +11% YoY, as well as its target of adding ~5,500 tenants and 13,000 km of fiber optic lines. We still believe that these targets will be achieved quite easily, and we project that in FY24F, MTEL will book revenue and EBITDA growth of +8.2% YoY and +9.5% YoY, respectively, supported by the potential for additional ~4,000 (7.0% YoY) tenants (mostly colocation tenants), which will bring its tenancy ratio to 1.59x. Several other factors that might help support MTEL’s future growth include: better telco industry climate, the completion of the IOH-H3I consolidation, and 5G penetration in Indonesia.
BUY, TP IDR 875/share. Considering its ample room for growth and solid financial structure (9M23: DER of 0.45x and Net Debt/EBITDA ratio of 1.96x), we decided to maintain our BUY rating on MTEL with a TP of IDR 875/share, reflecting 11.4x EV/EBITDA. Main risks: regulatory changes and slowing demand for telco towers.
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