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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 
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