Mitratel (MTEL) - FY24 Outlook: Becoming a stronger M&A player with robust revenue and oFCF trends

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Mitratel (MTEL)

FY24 Outlook: Becoming a stronger M&A player with robust revenue and oFCF trends

MTEL posted strong 4Q23 revenue growth, aiding inline FY23 earnings (+12.6% yoy) and EBITDA to reach critical mass at Rp6.9tr (+12.7% yoy).
We expect oFCF to turn positive in FY24 and raise our non-tower capex estimate. Our FY24F revenue are unchanged as we trim tenancies.
We maintain our Buy rating and TP of Rp960 on MTEL’s stronger growth outlook vs. peers, advantages in ex-Java and its attractive 9x EV/EBITDA.

Strong TSEL revenue in 4Q23, expect more non-tower rev. in FY24.

MTEL posted solid revenue growth in 4Q23 (Rp2.3tr, +8.2%qoq/+9.3%yoy) driving FY23 revenue to reach Rp8.6tr (+11.2%yoy, 100% of our FY23 est.), with significant revenue of Rp1.9tr (+18.7% qoq) from TSEL recorded in 4Q23. The contribution from “other revenue” (incl. fiber) rose to 10% in 4Q23 (vs. 6% in FY22). We expect MTEL to continue pursuing a more diversified revenue mix in FY24. This will support our 7.9% FY23-26F topline cagr estimate.

We raise our FY24F capex and non-tower revenue; CF +ve trajectory intact.

MTEL will maintain high organic capex rollout (Rp3.5tr in FY24F or Rp5.6tr including M&A and Rp4.3tr in FY23) to install an additional 10,000km of fiber and power supplies (PaaS) and drive growth in its non-tower revenue. Despite the capex and non-tower revenue upside, we adjust down the Tower Leasing rev. in the short term to reflect lower collocations of 3,000/year (from 4,000 prev.), as we see further telco consolidation.

Closer to the key recurring CF milestone.

MTEL has moved closer to a key milestone of positive oFCF (~-Rp788bn in FY23), in spite of ~Rp3.45tr asset acquisitions in the year. FY23 ND/EBITDA rose slightly to 2.4x (but with lower effective interest costs) and we expect this to remain stable given the organic oFCF trends. We forecast FY24 revenue growth of +7.9% and an 80.7% EBITDA margin to drive significant incremental CF, and thus expect MTEL’s organic oFCF to turn positive in FY24. This offers significant buffers to MTEL’s balance sheet to pursue more asset acquisitions (our model has not included MTEL’s current budget of Rp2.1tr for M&A).

Maintain Buy rating on higher growth and ST/LT advantages versus peers.

MTEL delivered FY21-23 revenue cagr of +11.8% gaining 510bps in EBITDA margin since its IPO and is well positioned to deliver more value by investing more in ex-Java areas where telco growth is higher (1,852 net B2S towers built in ex-Java vs. 1,111 in Java in FY23). With higher capex, MTEL should deliver a more diversified revenue mix and higher growth in the longer term. We maintain our Buy rating with an unchanged TP: Rp960 and a current attractive valuation of 9.3x FY24 EV/ EBITDA.

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