LINK
Contact our analyst Eka
79 % upside. BUY
26th October 2020
Price Rp2,080
Target price Rp3,730
26th October 2020
Price Rp2,080
Target price Rp3,730
Positive-growth revenue
- LINK had positive growth in 3Q 2020 with +5.% QoQ revenue growth to IDR 1.02 trillion and +6.8% YoY growth to IDR 2.95 trillion for the 9M2020. Revenue from Cable-tv grew +17.4% YoY to IDR 1.2 trillion, while revenue from broadband was flat at IDR 1.61 trillion.
- The revenue growth is inline with the increases in subscribers. LINK added 53,277 net subscriber in 3Q2020, and has added 147,464 subscribers in 9M2020, higher than 51,024 in 9M2019.
- LINK has reached 2.652 million homes passed and the penetration rate in 3Q2020 has reached 30.8% compared to 26.9% In 3Q2019.
- ARPU slightly decreased to IDR 369k in 3Q2020 as the subscribers increased.
- Management gave no guidance on 4Q2020 new subscribers, but we expect demand will stay high and help drive LINK revenue for the rest of 2020. We are targeting LINK revenue to grow single digit in 2020 to reach IDR 3.89 trillion.
- LINK has managed cost of sales and opex better in 3Q2020. This resulted in EBITDA in 3Q2020 of IDR 578 bn compared to IDR 540 bn in 3Q2019 and a slightly higher EBITDA margin of 56.5% in 3Q2020 compared to 56% in 2Q2020 and 53.8% in 1Q2020.
- In terms of profit, LINK still recorded a lower profit of IDR 698.9 billion -9.6% YoY in 9M2020 and the net profit margin decreased to 24% from 28%.
- LINK decision to migrate its network away from ICON+, is in process and within budget. The migration is estimated to cost IDR 3 trillion. It will be funded from bank loans of IDR 2.5 trillion and the balance from internal cashflow.
- We estimate profit will be IDR 849 billion in 2020F as the ARPU is still falling.
- We have a one year target price for LINK of IDR. 3,730, offering investors a potential return of 79%. This would mean the stock trading at 11x 2021F PE. We recommend BUY. We recommend BUY
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