Mansek BTEL: To raise tower price by ±20%

BTEL: To raise tower price by ±20% and plans to announce tender winner by end of Feb09 (BTEL,Rp50,Buy, TP:Rp75)

BTEL increase the sales price for their towers by as much as 20% without any additional cost. The company is still in the stage of negotiations between management and the buyers. Initially, the expected sales proceeds was Rp380bn, but with higher sales price, BTEL may get as much funding of Rp456bn from the sale of these towers. BTEL will leaseback the towers.

There are six companies interested in buying the BTEL towers. They are PT Tunas Solusi Pratama, PT Tower Bersama, PT Profesional Telekomunikasi Indonesia (Protelindo), PT Retower, Rice Marketel PT, and PT Power Telecom (Powertel). BTEL intends announces winners of tender end of Feb09.

Currently, BTEL is operating with a base of 2,490 towers of 30% (747 towers) are only owed by BTEL rest is under collocation. Hence, out of the 747 tower BTEL owns, it plans to sell around 72% of it (543 units).

Funds expected from sale is around Rp456bn. Net increase in opex would by Rp14bn but if we offset it by notional interest cost (around Rp68.4bn) assuming debt was raised to the amount of Rp456bn to fund capex, there will be net cost saving of Rp54.4bn. If we fine tune our FY09F to factor in the effect of tower sales (i.e taking a gain of Rp202bn as we assume a book value of the tower at Rp254bn) we arrive at net profit of Rp344bn (+73.3% from our current forecast). EPS would rise from Rp7.0/share to Rp12.1/share and hence PER09F falls from 7.6x to 4.1x.