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EXCL - 1Q20 Update

DATA ACCELERATION

As of 1Q20, EXCL posted a revenue of Rp6.5T, which grew by +9% (Y/Y) and was supported by hefty growth of data traffic by +41% (Y/Y). However, the Company noted that due to increasing competition and more aggressive pricing, EXCL had lost some of its subscribers. Bottom line, net profit stood at Rp1.5T, which was significantly boosted by gain from tower sale.

 

HEFTY DATA TRAFFIC

EXCL said that due to increasing competition since 4Q19, coupled with aggressive pricing by other players, the number of subscribers dropped to 55.5 million subs from previously 56.7 million subs in 4Q19. On the other hand, total traffic significantly jumped to 1,000 PB from 710 PB, which increased by +41% (Y/Y) and +7% (Q/Q), as the work from home (WFH) policy has elevated the use of data. In addition, 1Q20 ARPU remained strong at Rp36k, if compared with that of 4Q19 at Rp36k and that of 1Q19 at Rp33k. Legacy business also declined at an accelerated pace. Despite the strong performance result, EXCL noted that prolonged travel restriction could have negative impact to the industry. Moreover, rising unemployment rate could also result in lower data usage as a result of damaged purchasing power. We expect EXCL to continue its hefty data traffic growth, although there is a risk of pressured pricing due to tighten competitions. Our revenue estimate stands at Rp26.7T (+6.2% Y/Y).

 

DRIVEN BY GAIN FROM TOWER SALE

EXCL realized a gain on tower sale and leaseback amounting to Rp1.6T, as the Company agreed to sell 2,782 towers to Protelindo and PT Centratama Menara Indonesia (CMI). In addition, it is agreed that EXCL would lease back 2,763 towers in 10-year period. As a result, net profit soared to Rp1.5T from Rp57B. Going forward, we expect 2020F net profit to reach Rp1.9T, assuming that there will be no tower sale in the subsequent period.  

 

UNREVISED CAPEX

According to the Company, this year’s committed capex remains at Rp4T (+33% Y/Y) vs. Rp3T. Furthermore, we also see network expansion is still in progress, with total BTS stood at 133,536 from 122,175 in 1Q19, while 4G BTS jumped to 43,579 from 33,106. Thus, we remain optimistic on the top line growth potential, but it is important to note that expansion may be limited as a result of travel restriction, as of now.

 

VALUATION

We maintain our BUY recommendation with 12-month target price of Rp4,000/share (previous TP: Rp4,400/share). We arrived at the TP based on DCF (WACC: 9.6%, LTG: 3.0%) and we assign lower EV/EBITDA multiple of 5.3x, which is around its 3-year -1SD.

Thu May 14Th, 2020

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