IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Bottom-Up

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<a href="https://www.smartkarma.com/entities/pt-dayamitra-telekomunikasi" target="_blank" data-smartkarma-citation="entities:34741:1" rel="noopener">Mitratel (1319Z IJ)</a> is the largest telco tower owner and operator in Indonesia based on the number of telecommunication towers owned as of 30 June 2021, according to Analysys Mason. Mitratel is a subsidiary of <a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a>.</div>
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<div>Mitratel has launched an IPO to raise IDR20.0-24.9 trillion ($1.4-1.8 billion) at the IPO price range of IDR775-975 per share. Bookbuilding will close on 4 November and the shares are set to list on 22 November. </div>
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<p>In <a href="https://www.smartkarma.com/insights/mitratel-dayamitra-telekomunikasi-ipo-initiation-control-tower" target="_blank" data-smartkarma-citation="insights:59620" rel="noopener">Mitratel (Dayamitra Telekomunikasi) IPO Initiation: Control Tower</a>, we noted that in comparison to other major regions (US, Western Europe, China and India), the tower industry in Indonesia offers an attractive mix of high EBITDA margin, low capex, no colocation discount and no obligation to provide power in the contract. The tower industry also benefits from predictable revenue due to long-term contracts and high renewal rates. Mitratel's contracted revenue based on agreements with customers for all types of leases is IDR30.7 trillion, and the average remaining life of lease agreements is 6.3 years, as of 30 June 2021. We concluded that Mitratel's fundamentals tick all the right boxes. </p>
<div class="content-highlight"><p>Our valuation analysis suggests that the IPO price range is attractive. Overall, we would participate in the IPO.</p></div>
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Mitratel (1319Z IJ) is the largest telco tower owner and operator in Indonesia based on the number of telecommunication towers owned as of 30 June 2021, according to Analysys Mason. Mitratel is a subsidiary of Telekomunikasi Indonesia (TLKM IJ).

Mitratel has launched an IPO to raise IDR20.0-24.9 trillion ($1.4-1.8 billion) at the IPO price range of IDR775-975 per share. Bookbuilding will close on 4 November and the shares are set to list on 22 November. 


In Mitratel (Dayamitra Telekomunikasi) IPO Initiation: Control Tower, we noted that in comparison to other major regions (US, Western Europe, China and India), the tower industry in Indonesia offers an attractive mix of high EBITDA margin, low capex, no colocation discount and no obligation to provide power in the contract. The tower industry also benefits from predictable revenue due to long-term contracts and high renewal rates. Mitratel's contracted revenue based on agreements with customers for all types of leases is IDR30.7 trillion, and the average remaining life of lease agreements is 6.3 years, as of 30 June 2021. We concluded that Mitratel's fundamentals tick all the right boxes. 
Our valuation analysis suggests that the IPO price range is attractive. Overall, we would participate in the IPO.


Mitratel (Dayamitra Telekomunikasi) IPO: Valuation Insights

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/pt-dayamitra-telekomunikasi" target="_blank" data-smartkarma-citation="entities:34741:1" rel="noopener">Mitratel (1319Z IJ)</a> is the largest telco tower owner and operator in Indonesia based on the number of telecommunication towers owned as of 30 June 2021, according to Analysys Mason. Mitratel is a subsidiary of <a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a>.</p><p>Mitratel has launched an IPO to raise IDR20.0-24.9 trillion ($1.4-1.8 billion) at the IPO price range of IDR775-975 per share. Bookbuilding will close on 4 November and the shares are set to list on 22 November. </p><p>Indonesia's tower industry is fast consolidating into an oligopoly with three large tower companies which are Mitratel, <a href="https://www.smartkarma.com/entities/sarana-menara-nusantara-pt" target="_blank" data-smartkarma-citation="entities:6848:1" rel="noopener">Sarana Menara Nusantara (TOWR IJ)</a> (Protelindo) and <a href="https://www.smartkarma.com/entities/tower-bersama-infrastructure" target="_blank" data-smartkarma-citation="entities:3537:1" rel="noopener">Tower Bersama Infrastructure (TBIG IJ)</a>. In comparison to other major regions (US, Western Europe, China and India), the tower industry in Indonesia offers an attractive mix of high EBITDA margin, low capex, no colocation discount and no obligation to provide power in the contract.</p><div class="content-highlight"><p>The tower industry also benefits from predictable revenue due to long-term contracts and high renewal rates. Mitratel's contracted revenue based on agreements with customers for all types of leases is IDR30.7 trillion, and the average remaining life of lease agreements is 6.3 years, as of 30 June 2021. Overall, Mitratel's fundamentals tick all the right boxes, in our view. </p></div>

Mitratel (1319Z IJ) is the largest telco tower owner and operator in Indonesia based on the number of telecommunication towers owned as of 30 June 2021, according to Analysys Mason. Mitratel is a subsidiary of Telekomunikasi Indonesia (TLKM IJ).Mitratel has launched an IPO to raise IDR20.0-24.9 trillion ($1.4-1.8 billion) at the IPO price range of IDR775-975 per share. Bookbuilding will close on 4 November and the shares are set to list on 22 November. Indonesia's tower industry is fast consolidating into an oligopoly with three large tower companies which are Mitratel, Sarana Menara Nusantara (TOWR IJ) (Protelindo) and Tower Bersama Infrastructure (TBIG IJ). In comparison to other major regions (US, Western Europe, China and India), the tower industry in Indonesia offers an attractive mix of high EBITDA margin, low capex, no colocation discount and no obligation to provide power in the contract.The tower industry also benefits from predictable revenue due to long-term contracts and high renewal rates. Mitratel's contracted revenue based on agreements with customers for all types of leases is IDR30.7 trillion, and the average remaining life of lease agreements is 6.3 years, as of 30 June 2021. Overall, Mitratel's fundamentals tick all the right boxes, in our view. 

Mitratel (Dayamitra Telekomunikasi) IPO Initiation: Control Tower

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>Amid the prolonged 5G rollout, various industry groups have had their time to shine. Today we explain why we believe the cell towers are next to benefit, and we recommend adding exposure at current levels.</p>

Amid the prolonged 5G rollout, various industry groups have had their time to shine. Today we explain why we believe the cell towers are next to benefit, and we recommend adding exposure at current levels.

Cell Tower Stocks Turning The Corner -- Buy AMT, SBAC, and CCI

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<p>Telxius, a subsidiary of <a href="https://www.smartkarma.com/entities/telefonica-sa" target="_blank" data-smartkarma-citation="entities:21299:1" rel="noopener">Telefonica SA (TEF SM)</a> (50% Telefonica, 40% KKR, 10% Pontegadea) reached an agreement with Boston-based <a href="https://www.smartkarma.com/entities/american-tower-corp" target="_blank" data-smartkarma-citation="entities:6365:1" rel="noopener">American Tower (AMT US)</a> to sell its entire tower unit (30,722 sites across Argentina, Brazil, Chile, Germany, Peru and Spain).</p>
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<li>The EV is €7.7 bn including the remaining payments to be done by Telxius to <a href="https://www.smartkarma.com/entities/telefonica-deutschland-holding" target="_blank" data-smartkarma-citation="entities:21687:1" rel="noopener">Telefonica Deutschland Holding (O2D GR)</a> to complete the German transaction.</li>
<li>The price is 30.x EBITDA, above the usual 23x.</li>
<li>Telefónica will reduce its debt by €4.6 bn, 12.5% of the total.</li>
<li><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">Debt reduction and pending corporate operations provide the group with sufficient liquidity to maintain its commitment to shareholders for the time being.</span></li>
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<p><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">In the current context, Telefonica focuses on the management of FCF to preserve the payment of the dividend, by reducing investments. The dividend remains at €0.4 per share and debt, one of the group's main drawbacks, fell c.15% LTM. In the long term, the potential for structural growth is low, competition high, and room to maneuver limited. The current environment makes it difficult to sell non-strategic assets at adequate prices and questions the sustainability of the dividend.</span></p>
<h3><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">Recommendation</span></h3>
<p><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1"><strong>Telefonica</strong>: DCF valuation is <strong>€4.2</strong> (Capital IQ consensus, WACC 6.4%, g 0.3%).</span></p>
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<li><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">The sale of Telxius may support market expectations for a potential acceleration in the execution of the strategic reshuffle announced by management, thus leading to a re-rating of the company.</span></li>
<li>But there are risks: slower deleverage, lower economic growth in Spain (24% of EBITDA), macro deterioration and currency depreciations in Central and South America (c. 15% of EBITDA). Positive surprises may come from further disposals at high multiples thus leading to faster deleverage, better than expected economic growth in Central and South America and a reduction of the (so far unsustainable) dividend.</li>
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<p><strong>Cellnex</strong>, reiterate <strong>TP</strong> of <strong>€64.36</strong>. Cellnex could become the object of a take-over.</p>

Telxius, a subsidiary of Telefonica SA (TEF SM) (50% Telefonica, 40% KKR, 10% Pontegadea) reached an agreement with Boston-based American Tower (AMT US) to sell its entire tower unit (30,722 sites across Argentina, Brazil, Chile, Germany, Peru and Spain).

The EV is €7.7 bn including the remaining payments to be done by Telxius to Telefonica Deutschland Holding (O2D GR) to complete the German transaction.
The price is 30.x EBITDA, above the usual 23x.
Telefónica will reduce its debt by €4.6 bn, 12.5% of the total.
Debt reduction and pending corporate operations provide the group with sufficient liquidity to maintain its commitment to shareholders for the time being.

In the current context, Telefonica focuses on the management of FCF to preserve the payment of the dividend, by reducing investments. The dividend remains at €0.4 per share and debt, one of the group's main drawbacks, fell c.15% LTM. In the long term, the potential for structural growth is low, competition high, and room to maneuver limited. The current environment makes it difficult to sell non-strategic assets at adequate prices and questions the sustainability of the dividend.
Recommendation
Telefonica: DCF valuation is €4.2 (Capital IQ consensus, WACC 6.4%, g 0.3%).

The sale of Telxius may support market expectations for a potential acceleration in the execution of the strategic reshuffle announced by management, thus leading to a re-rating of the company.
But there are risks: slower deleverage, lower economic growth in Spain (24% of EBITDA), macro deterioration and currency depreciations in Central and South America (c. 15% of EBITDA). Positive surprises may come from further disposals at high multiples thus leading to faster deleverage, better than expected economic growth in Central and South America and a reduction of the (so far unsustainable) dividend.

Cellnex, reiterate TP of €64.36. Cellnex could become the object of a take-over.

<p><a href="https://www.smartkarma.com/entities/cellnex-telecom-sau" target="_blank" data-smartkarma-citation="entities:21258:1" rel="noopener">Cellnex Telecom Sau (CLNX SM)</a> has closed a transformational operation, valued at around €10 bn, which has allowed it to reach over 103,000 telecommunications towers (vs. the prior 73,000) and strengthen its leadership position in Europe. The company has met its expansion objectives, even earlier than planned (December 2021). A capital increase has not been necessary, although it has run out of ammunition for future acquisitions.</p>
<p>It is difficult to overstate the importance of the purchase. It represents an earthquake in the European market for telecommunications towers, which now has a colossus, far away from any other potential European player.</p>
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<li>Since its IPO in 2015, Cellnex has invested c. €26 bn in acquisitions.</li>
<li>After the pact, Cellnex's footprint extends to twelve countries. Spain (where Cellnex is based), with its 11,000 towers, is now only the fifth market in number of towers (and represents only 10% of the total footprint) behind Italy (24,500) , United Kingdom (14,700), France (13,700) and Poland (11,900).</li>
<li>This operation is unique due to its size and transformative nature: it involves raising the number of towers by 41%, revenue by 46% and backlog by up to 63%, long-term insured revenue.</li>
</ul>
<p>A capital increase was not strictly necessary to purchase the Hutchison Towers. The company had cash available of more than €8 bn. However, the <strong>net debt/EBITDA approaches 6x</strong> and therefore Cellnex runs out of ammunition for future acquisitions. I do not rule out that Cellnex pays future purchases with its own shares.</p>
<p>Taking an average of DCF valuation and multiples, my <strong>TP is €64.36</strong> per share, which implies an upside of 20% to the last closing price. Therefore my recommendation is <strong>LONG Cellnex</strong>.</p>
<ul>
<li>The dividend yield is low because Cellnex is in an accelerated expansionary phase. However, the generation of recurring cash implies a profitability of more than 5% as of 2022e.</li>
</ul>

Cellnex Telecom Sau (CLNX SM) has closed a transformational operation, valued at around €10 bn, which has allowed it to reach over 103,000 telecommunications towers (vs. the prior 73,000) and strengthen its leadership position in Europe. The company has met its expansion objectives, even earlier than planned (December 2021). A capital increase has not been necessary, although it has run out of ammunition for future acquisitions.
It is difficult to overstate the importance of the purchase. It represents an earthquake in the European market for telecommunications towers, which now has a colossus, far away from any other potential European player.

Since its IPO in 2015, Cellnex has invested c. €26 bn in acquisitions.
After the pact, Cellnex's footprint extends to twelve countries. Spain (where Cellnex is based), with its 11,000 towers, is now only the fifth market in number of towers (and represents only 10% of the total footprint) behind Italy (24,500) , United Kingdom (14,700), France (13,700) and Poland (11,900).
This operation is unique due to its size and transformative nature: it involves raising the number of towers by 41%, revenue by 46% and backlog by up to 63%, long-term insured revenue.

A capital increase was not strictly necessary to purchase the Hutchison Towers. The company had cash available of more than €8 bn. However, the net debt/EBITDA approaches 6x and therefore Cellnex runs out of ammunition for future acquisitions. I do not rule out that Cellnex pays future purchases with its own shares.
Taking an average of DCF valuation and multiples, my TP is €64.36 per share, which implies an upside of 20% to the last closing price. Therefore my recommendation is LONG Cellnex.

The dividend yield is low because Cellnex is in an accelerated expansionary phase. However, the generation of recurring cash implies a profitability of more than 5% as of 2022e.


United States

American Tower Corp. is a real estate investment trust that owns, operates, and develops wireless communications and broadcast towers in the United States. The Company leases antennae sites on multi-tenant towers for a diverse range of wireless communications industries, including personal communications services, paging, and cellular.

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American Tower (AMT US)

Mitratel (Dayamitra Telekomunikasi) IPO: Valuation Insights

Mitratel has launched an IPO to raise $1.4-1.8 billion. Our valuation analysis suggests that the IPO price range is attractive. Overall, we would...

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Mitratel (Dayamitra Telekomunikasi) IPO Initiation: Control Tower

Mitratel has launched an IPO to raise $1.4-1.8 billion. Mitratel is well-placed to benefit from industry consolidation. Overall, Mitratel's...

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Cell Tower Stocks Turning The Corner -- Buy AMT, SBAC, and CCI

Amid the prolonged 5G rollout, various industry groups have had their time to shine. We explain why we believe the cell towers are next to benefit,...

Vermilion Research

Telefonica's Disposal of Telxius

Telefonica manages FCF to preserve the divi, by reducing investments. Debt fell c.15% LTM. Structural growth potential is low, competition high,...

Jesus Rodriguez Aguilar

Cellnex's Transformational Acquisition

The purchase represents an earthquake in European telco towers. An average of DCF and multiples gives a TP of €64.36 per share, which implies an...

Jesus Rodriguez Aguilar

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