TOWR share price has been in a dreaded downtrend since the beginning of the year. As of the closing on June 26th, TOWR closed the trading day flat on IDR 685 / share with YTD performance of -30.8%.
Unsupportive interest rate outlook which combined by capital outflow trend on JCI may have been the main concern which weigh down TOWR's share price. Not to mention, TOWR was excluded from MSCI on May-24 rebalancing, putting an even worse selling pressure on the stock.
TOWR Price Performance
Aside from the concerns mentioned above, some investors seem to fear that Starlink might also be a threat to tower industry. However, we see that Starlink does not actually pose a threat to the telecommunications tower industry as it is more appropriate for rural areas lacking fiber connectivity. Fiber connectivity provides reliable and faster networks. In contrast, Starlink faces challenges such as high monthly fees, substantial hardware costs, and potential regulatory or licensing issues.
Data Packages Comparison
In our view, TOWR has become more attractive now after such significant share price decline. Beside it's undemanding valuation, we also see several prospect than can turnaround the trajectory of TOWR share price in the future.
Firstly, we see that TOWR still has a growth story as they expand their business through TOWR’s subsidiary, iForte, which is set to acquire Inti Bangun Sejahtera (IBST). IBST has averaged IDR1tn in revenue for the past five years from assets of 3,234 towers with 5,885 tenants, and 17,239km of fiber optic. This could strengthen TOWR's position as the second-largest tower company, extending its fiber optic footprint.
The second thing that we believe can become TOWR's strength is that although TOWR's tower distribution may not as diverse as MTEL's tower distribution which covers more remote areas, TOWR's towers and fiber optics are located in urban areas which we believe to be more lucrative than remote areas.
TOWR's Tower Portfolio
TOWR's Fiber Optics Portfolio
TOWR is attractively valued at 7.7x forward EV/EBITDA, below the industry average of 10x. Its projected net profit growth in 2024-25F is 12% yoy and 6% yoy. TOWR has high ROE of 19.8% and low cost of debt at 6.3%. Therefore we reiterate our buy call with TP of IDR1,500, implies 21.0x and 11.6x 2024F PE and EV/EBITDA.
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