LINK Sep2020

LINK

Contact our analyst Eka

88 % upside. BUY
8th September 2020
Price Rp2,220
Target price Rp4,175

Broadband and Cable-tv Growth

LINK booked single-digit revenue growth of +6.9% YoY from IDR. 1.81 trillion in 1H2019 to IDR 1.93 trillion in 1H2020. Revenue from Cable-tv grew +12.2% to IDR 760.5 billion, while revenue from broadband grew +3.2% to IDR 1.07 trillion.
LINK has reached 2.62 million homes passed, adding 79k in 2Q2020 and 74k in 1Q2020. For 2021-2022 LINK targets to reach 250k homes passed.
LINK also recorded a higher penetration rate in 2Q2020 of 29.1% compared to 27.5%. in 1Q2020 The Churn rate in 2Q2020 was reduced to 2.4% compared with 2.6% in 1Q2020.
LINK subscriber grew +12.4% to 762k subscribers in 1H2020, while the blended ARPU has declining since 2Q2019 to IDR 375k as LINK aim is to gain a larger market share by expanding into secondary cities.
We assume continued growth in homes passed and subscribers plus that ARPU will stabilize in 2H2020, which will result in revenue reaching IDR 4.0 trillion or 7% growth in 2020F.

Slightly lower margin

Despite growth in revenue, LINK profit decreased -13.5% YoY in 1H2020 and the net profit margin decreased to 23.6% from 29.2%.
EBITDA also decreased slightly -1.9% YoY from IDR. 1.08 trillion to IDR. 1.06 trillion and the margin from 59.8% to 54.9% in 1H2020.
In August 2020, LINK successfully extended the right of way contract with ICON+ so they can continue using ICON+ for the broadband network until the end of June 2022. With this contract, LINK can migrate its broadband cables to its own infrastructure.
We estimate profit can reach IDR 929.5 billion, up slightly +4% YoY with a stable ARPU and subscriber growth which will offset the higher cost of migration.

Valuation: 88% upside

We have a one year target price for LINK of IDR. 4,175, offering investors a potential return of 88%. This would mean the stock trading at 12x 2021F PE. We recommend BUY

PREVIOUSLY

April, 2018