MTEL’s revenue surged by 7.33% YoY to IDR2.21 trillion, driven chiefly by the tower leasing segment’s 5.40% YoY growth (+7.19% QoQ) to Rp1.84 trillion. The uptick in tower rental was propelled by a significant 16.56% YoY increase (+1.43% QoQ) in collocation, particularly fueled by non-Telkom customers during 1Q24.

MTEL witnessed an 8.42% YoY rise in tenants during the same period. This robust performance translated into an EBITDA of Rp1.84 trillion, marking a substantial 39.99% YoY increase (+27.58% QoQ) and resulting in an EBITDA Margin of 83.5% in 1Q24 (vs. 81.5% in 1Q23), culminating in a net profit of Rp521 billion, reflecting a 3.98% YoY growth.

MTEL, a leading presence in Southeast Asia with 38,135 towers in Indonesia, added 121 new towers in 1Q24, primarily outside Java, expecting a 7.15% CAGR (2024-2029) in tenant growth, supported by Rp5.6 trillion allocated for capex in 2024, signaling high single-digit revenue and EBITDA growth.

We forecast FY24E revenue to IDR9.4 trillion in FY24, primarily fueled by the tower leasing segment’s 11.49% CAGR (2024-2029) and the addition of 4k new tenants. Expansion by non-telecom companies will also boost growth in the collocation segment, despite increased depreciation costs.

Using the Discounted Free Cash Flow method with a Required Return of 5.8% and Terminal Growth of 3% as terminal value. We assess that MTEL has an upside potential of 25.21% or IDR720 per share (Expected PE at 28x and EV/EBITDA at 10.16x in FY24F); thus, we give a Buy rating to MTEL. However, we need to consider the following risks: 1) Regulatory changes, 2) increased competition from telecommunication and tower operators, 3) economic downturn and rising interest rates may negatively affect MTEL’s profitability and tower rental income and squeeze its profit margin.