- PT Tower Bersama Infrastructure Tbk (TBIG) is the holding company of the Tower Bersama Group, one of the two leading independent tower companies (ITCs) in Indonesia. In 9M20, TBIG managed 16,215 telecommunication sites with 31,703 tenants. TBIG adds 3,319 gross tenancies in 9M20, surpassing its FY20 guidance of 3,000 tenant addition. Robust growth in co-location improved the TBIG tenancy ratio to 1.96x. We expect TBIG to add more than 3,000 tenants in the next three years with sliglhtly declined in lease rate.

- TBIG revenue increases at 8.3% CAGR in 2016-2019 and would grow at 8.1% CAGR in 2019- 2023 on the back of steady site expansion. TBIG have an average above 80% EBITDA margin and are expected to maintain that level in the future. The company also have a solid operating margin above 60% and a double-digit net profit margin.

- Roughly 82% of revenue comes from the Big 3 operators, enabling TBIG to face lower risk from MNO consolidation and lease renewal contract. Revenue from Telkomsel as the biggest tenant has steadily declined since 2017 and would continue to move on that downward trajectory in the coming years. To pick up the slack, TBIG receives more orders from smaller MNOs namely Hutchison 3 Indonesia and FREN.

- TBIG has a higher debt level than TOWR as its closest competitor. Nevertheless, its net debt to EBITDA slowly reduces from 5.9x in 2014 to 5.7x in 2019. The company also generates enough profit to cover its yearly interest expense with the EBITDA coverage ratio at 2.0x in 2019. In addition, TBIG stands to benefit from the current low interest rate environment as some of its debts are paying a floating rate. TBIG has also actively refinanced its maturing debt. In the near term, TBIG will focus on balance sheet deleveraging and therefore will pause any debtfunded acquisition

- We initiate our coverage on Tower Bersama Infrastructure (TBIG) with a BUY rating and IDR 1,730 target price. Our price target is based on DCF calculation and assumes 8.3% WACC implying FY21F EV/EBITDA of 12.8x with a 17.7% potential upside. A key risk of our call are slower MNO expansion, MNO consolidation, lease rate pressure, regulation changes, higher than expected financial cost, and alternate access technologies.

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