Tower Bersama (TBIG.IJ Rp 1,935; HOLD TP Rp 1,800) FY24 Earnings Miss; Build-to-suit-Driven Growth Prompts Downgrade in Valuation

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Tower Bersama (TBIG IJ)

FY24 Earnings Miss; Build-to-suit-Driven Growth Prompts Downgrade in Valuation

4Q24 earnings fell short due to non-cash items and higher taxes, despite stable revenue and flat EBITDA, driven by new anchor tenant additions.
Net tenancy growth in FY24 was mainly BTS-driven; collocation demand remained weak, impacted by relocations and non-renewal activity.
We revise our TP to Rp1,800 based on a blended valuation, reflecting outlook for weak tenancy ratios; downgrade our rating to Hold.

4Q24 earnings missed expectations

TBIG posted 4Q24 net profit of Rp194bn (-55.5% qoq, -56.0% yoy), missing expectations despite resilient topline. Revenue rose to Rp1.74tr in 4Q24 (+1.6% qoq, +3.1% yoy), supported by higher anchor tenant additions, hence the tenancy ratio slipped further to 1.79x. 4Q24 EBITDA remained flat, leading to a lower margin of 84.2% (-140bps qoq). Pre-tax profit was dragged by non-cash fair value adjustments, impairments and revaluations. Additionally, the effective tax rate spiked to 54%, further pressuring the bottom-line.

TBIG marches on building new towers for new anchor tenancies mainly

Net tenancy additions reached just 178 in 4Q24 and 1,499 in FY24, comprising of 213/1,421 net BTS tenancies and only -35/78 net collocations. This highlights that tenancy growth was primarily driven by BTS expansion, with limited support from collocations—likely impacted by tenant relocations (e.g., IOH) and non-renewals, weighing on the tenancy ratio. On a gross basis, TBIG built 270/1,551 new BTS towers and added 262/782 collocations, bringing total gross tenancy additions to 532 in 4Q24 and 2,333 in FY24.

FY24 soft revenue/earnings setting the tone for FY25 amid new telco merger

FY24 net profit was Rp1.36tr (-12.7% yoy), missing ests. on higher interest and non-operating costs. Revenue rose modestly by +3.4% yoy, supported by stronger FTTT contributions. EBITDA margin slipped to 85.5% (-80bps yoy) on lower tenancy ratio, but EBIT grew +2.0% yoy with COGS D&A under control. Adjusted for one-offs, FY24 earnings were broadly flat.

Earnings Cut; Downgrade to Hold

We downgrade our rating to Hold following earnings adjustments of -19%/-24%/-28% for FY25-27, reflecting the muted outlook for tenancy ratio with growth likely to remain BTS-driven and less from collocations. Our revised blended valuation (DCF and 5Y EV/EBITDA of 12.7x) yields a new TP of Rp1,800. The key risk remains weaker demand for collocations as telcos increasingly shift their network focus to ex-Java regions.

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