Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Sarana Menara Nusantara / Equity Bottom-Up

The accelerated digitalization in Indonesia excites many and can be seen with how much money has been thrown to the startups such as <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> , and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a>, and many would think that smartphone upgrade is the key factor to play this, therefore, buying smartphone retailer such as <a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ)</a> or <a href="https://www.smartkarma.com/entities/trikomsel-oke-tbk-pt" target="_blank" data-smartkarma-citation="entities:4796:1" rel="noopener">Trikomsel Oke (TRIO IJ)</a> is the way to do it but telco tower such as <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> provides growth with less volatility due to the long term, non-cancelable contract.
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The other fact is that the population per tower in Indonesia is still very high compared to other countries such as China and Japan although it is almost consistent with what they have in India. In order to optimize telco connectivity with the growing internet data demand, telco operators need to build more towers and <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> is just the right player to do that. 
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The accelerated digitalization in Indonesia excites many and can be seen with how much money has been thrown to the startups such as Gojek (1379371D IJ) , and Tokopedia PT (1087142D IJ), and many would think that smartphone upgrade is the key factor to play this, therefore, buying smartphone retailer such as Erajaya Swasembada (ERAA IJ) or Trikomsel Oke (TRIO IJ) is the way to do it but telco tower such as Sarana Menara Nusantara (TOWR IJ) provides growth with less volatility due to the long term, non-cancelable contract.

The other fact is that the population per tower in Indonesia is still very high compared to other countries such as China and Japan although it is almost consistent with what they have in India. In order to optimize telco connectivity with the growing internet data demand, telco operators need to build more towers and Sarana Menara Nusantara (TOWR IJ) is just the right player to do that. 


Sarana Menara Nusantara (TOWR): Data Hungry Provider

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

<a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a> reported FY2020 results recently, which continued to reflect the company's ongoing digital transformation and increasing importance as a proxy for Indonesia's booming digital economy, with Telkomsel's digital business increasing its contribution to 71.6% of sales in FY2020 versus 63.9% in FY2019. 
The company's broadband service Indihome also continues to show strong performance, with revenue up by +21.2% driven by strong growth in subscribers and improving ARPU.
The enterprise segment also showed surprisingly strong growth during the year but especially in 4Q2020, where it saw revenue growth of +67.9% YoY driven by data centres.
Telkomsel deployed a further 27,700 new towers in FY2020, bringing the total to 231,200 BTS towers and it continues to transfer towers to Mitratel.
<a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a> recently further increased its investment into <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek</a> to US$450m signifying its commitment to the digital economy.
<a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a> remains an increasingly interesting play on Indonesia's growing appetite for data and broadband services, as these areas take over as growth drivers for the company and the legacy voice and SMS businesses fade. The increasing exposure to digital services outside providing the network and data make it a potential candidate for a digital re-rating. The company trades on 5.6x FY2021E EV/EBITDA and 4.8x FY22E EV/EBITDA versus the 5-year average of 6.2x forward EV/EBITDA, making it attractive even without any re-rating.
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Telekomunikasi Indonesia (TLKM IJ) reported FY2020 results recently, which continued to reflect the company's ongoing digital transformation and increasing importance as a proxy for Indonesia's booming digital economy, with Telkomsel's digital business increasing its contribution to 71.6% of sales in FY2020 versus 63.9% in FY2019. 
The company's broadband service Indihome also continues to show strong performance, with revenue up by +21.2% driven by strong growth in subscribers and improving ARPU.
The enterprise segment also showed surprisingly strong growth during the year but especially in 4Q2020, where it saw revenue growth of +67.9% YoY driven by data centres.
Telkomsel deployed a further 27,700 new towers in FY2020, bringing the total to 231,200 BTS towers and it continues to transfer towers to Mitratel.
Telekomunikasi Indonesia (TLKM IJ) recently further increased its investment into Gojek to US$450m signifying its commitment to the digital economy.
Telekomunikasi Indonesia (TLKM IJ) remains an increasingly interesting play on Indonesia's growing appetite for data and broadband services, as these areas take over as growth drivers for the company and the legacy voice and SMS businesses fade. The increasing exposure to digital services outside providing the network and data make it a potential candidate for a digital re-rating. The company trades on 5.6x FY2021E EV/EBITDA and 4.8x FY22E EV/EBITDA versus the 5-year average of 6.2x forward EV/EBITDA, making it attractive even without any re-rating.




Telkom Indonesia (TLKM IJ) - Digital Catalysts Abound?

XLSMART Telecom Sejahtera / Equity Bottom-Up

Indonesian mobile operator company <a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a> released a respectable set of FY2020 results last week with a +6% YoY increase in service revenue, despite COVID-19.
The increase was driven by data revenue with a growth of +10% YoY to IDR21.39tn, making up 92% of service revenues, with 89% of its subscribers using smartphones, making it the purest play on data in the industry. 
<a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a> also posted a +31% YoY increase in EBITDA to IDR13.06tn but profit for the year fell -91.8% to IDR 371.6bn. It did however see a +76% increase in FCF on the back of increased EBITDA. 
2020 data traffic grew by +47% YoY partly due to an increase in the number of subscribers from 56.88 Mn in the 3Q2020 to 57.89 Mn in the 4Q2020. There was also a YoY increase in average revenue per user (ARPU) to IDR 36,000 in 2020 versus IDR35,000 for FY2019.
The company continues to build out its 4G coverage and reposition its subscriber base and reallocate capacity towards 4G, with only 10% now left using the 3G service.
For 2021, <a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a> is allocating a capex of IDR 7tn focusing on developing the network infrastructure, IT development, and digitization. In addition, the company is also focusing on the fiberization process to prepare the network for the eventual launch of 5G.
<a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a> remains the purest proxy for the continued growth in demand for data in Indonesia and should also be a beneficiary from the ongoing consolidation in the industry, with Hutchison's "3" slated to merge with <a href="https://www.smartkarma.com/entities/indosat-tbk-pt" target="_blank" data-smartkarma-citation="entities:5737:1" rel="noopener">Indosat Tbk PT (ISAT IJ)</a>. 
This should help to alleviate competitive pressures on data pricing. <a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ) </a>trades on 3.7x FY21E EV/EBIDTA and 3.2x FY22E EV/EBITDA versus its 3-year average forward EV/EBITDA of 4.8x, making it look attractive from a valuation standpoint.

Indonesian mobile operator company XL Axiata (EXCL IJ) released a respectable set of FY2020 results last week with a +6% YoY increase in service revenue, despite COVID-19.
The increase was driven by data revenue with a growth of +10% YoY to IDR21.39tn, making up 92% of service revenues, with 89% of its subscribers using smartphones, making it the purest play on data in the industry. 
XL Axiata (EXCL IJ) also posted a +31% YoY increase in EBITDA to IDR13.06tn but profit for the year fell -91.8% to IDR 371.6bn. It did however see a +76% increase in FCF on the back of increased EBITDA. 
2020 data traffic grew by +47% YoY partly due to an increase in the number of subscribers from 56.88 Mn in the 3Q2020 to 57.89 Mn in the 4Q2020. There was also a YoY increase in average revenue per user (ARPU) to IDR 36,000 in 2020 versus IDR35,000 for FY2019.
The company continues to build out its 4G coverage and reposition its subscriber base and reallocate capacity towards 4G, with only 10% now left using the 3G service.
For 2021, XL Axiata (EXCL IJ) is allocating a capex of IDR 7tn focusing on developing the network infrastructure, IT development, and digitization. In addition, the company is also focusing on the fiberization process to prepare the network for the eventual launch of 5G.
XL Axiata (EXCL IJ) remains the purest proxy for the continued growth in demand for data in Indonesia and should also be a beneficiary from the ongoing consolidation in the industry, with Hutchison's "3" slated to merge with Indosat Tbk PT (ISAT IJ). 
This should help to alleviate competitive pressures on data pricing. XL Axiata (EXCL IJ) trades on 3.7x FY21E EV/EBIDTA and 3.2x FY22E EV/EBITDA versus its 3-year average forward EV/EBITDA of 4.8x, making it look attractive from a valuation standpoint.

XL Axiata (EXCL IJ) - High-Speed Digital Enabler

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Smartkarma hosted a Webinar with <a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a> this week, which revealed a positive long-term picture, despite some near term competitive headwinds. The company remains confident in its position as one of the key enablers of the Indonesian digital economy, with around 90% of revenues coming from data and 75% of its subscriber base on 4G. Given the share price impact of a recent pick up in competitive pricing driven by <a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ),</a> valuations are looking appealing. 
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Competition has heated up with Telkomsel offering selective unlimited data plans in 65 cities although these are not truly unlimited but more add-ons. 
There has been no reaction from the smaller players to Telkom's move and it is still priced about the smaller players. 
<a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a> continues to focus on growing its presence outside Java, which is more favourable pricing wise and still only has a 13% market share leaving plenty of upside. 
The company is also focused on increasing fiberisation of its network, which helps maintain a better service and will pave the way longer term for 5G. It is also offering its own fixed line high speed broadband service. 
<a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a> looks attractive trading on 3.6x FY21E EV/EBITDA versus <a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a> on 5.0x FY21E EV/EBITDA and is a much purer play on data.


Smartkarma hosted a Webinar with XL Axiata (EXCL IJ) this week, which revealed a positive long-term picture, despite some near term competitive headwinds. The company remains confident in its position as one of the key enablers of the Indonesian digital economy, with around 90% of revenues coming from data and 75% of its subscriber base on 4G. Given the share price impact of a recent pick up in competitive pricing driven by Telekomunikasi Indonesia (TLKM IJ), valuations are looking appealing. 

Competition has heated up with Telkomsel offering selective unlimited data plans in 65 cities although these are not truly unlimited but more add-ons. 
There has been no reaction from the smaller players to Telkom's move and it is still priced about the smaller players. 
XL Axiata (EXCL IJ) continues to focus on growing its presence outside Java, which is more favourable pricing wise and still only has a 13% market share leaving plenty of upside. 
The company is also focused on increasing fiberisation of its network, which helps maintain a better service and will pave the way longer term for 5G. It is also offering its own fixed line high speed broadband service. 
XL Axiata (EXCL IJ) looks attractive trading on 3.6x FY21E EV/EBITDA versus Telekomunikasi Indonesia (TLKM IJ) on 5.0x FY21E EV/EBITDA and is a much purer play on data.

XL Axiata (EXCL IJ) - Enabling and Converging in Indonesia

<a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a> is undergoing a transition, with its legacy business in a downward spiral, with its data business taking up the reigns of growth. The big question is when the decline in the legacy business will plateau, allowing the growth in data to be reflected in headline numbers. 1H202O numbers saw revenues fall -3.6% YoY to IDR66.9tn, with the decline of -27.5% in SMS, fixed, and cellular voice to IDR13.0tn masking the +6.8% revenue growth in data, internet and IT services to IDR35.3bn. Mobile Data saw especially strong growth of +13.5% revenue growth in 1H2020, on the back of 40% plus growth in data volumes. Telkomsel continues to expand its content offering as well as other services such as gaming, which are helping to further increase data consumption.Its high-speed broadband and pay-TV service under Indihome grew revenues by +19.1% with subscribers reaching a total of 7.45m. Indihome continues to upsell add-ons to existing customers, which is helping to support ARPUs. <div><div>
A key change from a pricing perspective, which caused some recent sell-off has been the introduction of unlimited data plans in a limited number of cities. Management clarified this strategy in its recent analyst call suggesting it was for a combination of factors including market share, declining affordability and network utilisation. The impact has in fact led to an increase in ARPUs as subscribers have topped existing plans. 
Valuations look attractive, with <a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a> trading on 5.2x FY21E EV/EBITDA with a supportive dividend yield of 5.4% for FY20E. This is an interesting entry point for investors looking to get exposure to Indonesia's long-term digitalisation theme.
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Telekomunikasi Indonesia (TLKM IJ) is undergoing a transition, with its legacy business in a downward spiral, with its data business taking up the reigns of growth. The big question is when the decline in the legacy business will plateau, allowing the growth in data to be reflected in headline numbers. 1H202O numbers saw revenues fall -3.6% YoY to IDR66.9tn, with the decline of -27.5% in SMS, fixed, and cellular voice to IDR13.0tn masking the +6.8% revenue growth in data, internet and IT services to IDR35.3bn. Mobile Data saw especially strong growth of +13.5% revenue growth in 1H2020, on the back of 40% plus growth in data volumes. Telkomsel continues to expand its content offering as well as other services such as gaming, which are helping to further increase data consumption.Its high-speed broadband and pay-TV service under Indihome grew revenues by +19.1% with subscribers reaching a total of 7.45m. Indihome continues to upsell add-ons to existing customers, which is helping to support ARPUs. 
A key change from a pricing perspective, which caused some recent sell-off has been the introduction of unlimited data plans in a limited number of cities. Management clarified this strategy in its recent analyst call suggesting it was for a combination of factors including market share, declining affordability and network utilisation. The impact has in fact led to an increase in ARPUs as subscribers have topped existing plans. 
Valuations look attractive, with Telekomunikasi Indonesia (TLKM IJ) trading on 5.2x FY21E EV/EBITDA with a supportive dividend yield of 5.4% for FY20E. This is an interesting entry point for investors looking to get exposure to Indonesia's long-term digitalisation theme.


Telekomunikasi Indonesia (TLKM IJ) - Out with the Old and in with the New

Indonesia

Indosat Ooredoo Hutchison provides digital telecommunication services, including cellular, fixed telecommunications, and multimedia, data communication, and internet (MIDI) services across Indonesia. The company offers prepaid and post-paid mobile services, international and roaming services, data communication, IT services, and electronic payment and remittance services. It was founded in 1967 and is headquartered in Jakarta, Indonesia.

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Indosat Ooredoo Hutchison (ISAT IJ)

Sarana Menara Nusantara (TOWR): Data Hungry Provider

In order to optimize telco connectivity with the growing internet data demand, telco operators need to build more towers and Sarana Menara...

Henry Soediarko

Telkom Indonesia (TLKM IJ) - Digital Catalysts Abound?

Telkom Indonesia is increasingly exposed to the digital economy, not just through data and network but through digital mobile services, fixed...

Angus Mackintosh

XL Axiata (EXCL IJ) - High-Speed Digital Enabler

XL Axiata (EXCL IJ) remains the purest proxy for the continued growth in demand for data in Indonesia and should also be a beneficiary from the...

Angus Mackintosh

XL Axiata (EXCL IJ) - Enabling and Converging in Indonesia

XL Axiata remains the key telco proxy for the digital economy in Indonesia with an increasing appetite for data and better quality mobile broadband...

Angus Mackintosh

Telekomunikasi Indonesia (TLKM IJ) - Out with the Old and in with the New

Telekomunikasi Indonesia (TLKM IJ) is undergoing a transition, with its legacy business in a downward spiral, with its data business taking up the...

Angus Mackintosh

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