UOB (AI)

TOWR BUY TP 875

TOWR IJ Update / One of the most undervalued stocks in the market
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TOWR records one of the best years in growth of new leases about 3,000 leases as of 8M18 or up to 5,000 incl.KIN. We expect revenue growth of 7-8% for 18F or 150-250bp increase from 2017.

New management at Hutchinson appears committed to stay in the market and most probably re-lease majority of leases expiring in 2020-2024...that in effect reduces revenue visibility risk.

With recent change in ISAT management, rumors emerge that ISAT could set a new round of tower sales considering also ISAT's operational and financial performance. TOWR has expressed its willingness to increase leverage if any deal is value accretive and is in a far stronger position than its peer TBIG. This could be another strong catalyst for TOWR.

As of1H18 TOWR has built over 6,000km of fibre optic network with another 2,000km in the pipeline in 3Q18 and expects this number to increase further

TOWR has initiated buyback to support liquidity

Consensus expects EPS growth of +12%/+11%/+9% in 18/19/20F but share price is -39%ytd trading at 6.7x ev/ebitda below -2SD.. so current price does not reflect expected earnings growth...while valuation gap with TBIG gets larger at 44% discount

We maintain our strong buy at TP:Rp875 or implies 10.5x 19F ev/ebitda.
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