IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Bottom-Up

Dayamitra Telekomunikasi PT / Equity Bottom-Up

<div><div id="ember4189"><div>
<div>
<a href="https://www.smartkarma.com/entities/pt-dayamitra-telekomunikasi" target="_blank" data-smartkarma-citation="entities:34741:1" rel="noopener">Mitratel (1319Z IJ)</a> is the largest telco tower owner and operator in Indonesia based on the number of telecommunication towers owned as of 30 June 2021, according to Analysys Mason. Mitratel is a subsidiary of <a href="https://www.smartkarma.com/entities/telekomunikasi-indonesia" target="_blank" data-smartkarma-citation="entities:1051:1" rel="noopener">Telekomunikasi Indonesia (TLKM IJ)</a>.</div>
<div></div>
<div>Mitratel has launched an IPO to raise IDR20.0-24.9 trillion ($1.4-1.8 billion) at the IPO price range of IDR775-975 per share. Bookbuilding will close on 4 November and the shares are set to list on 22 November. </div>
<div></div>
</div></div></div><div>
<p>In <a href="https://www.smartkarma.com/insights/mitratel-dayamitra-telekomunikasi-ipo-initiation-control-tower" target="_blank" data-smartkarma-citation="insights:59620" rel="noopener">Mitratel (Dayamitra Telekomunikasi) IPO Initiation: Control Tower</a>, we noted that in comparison to other major regions (US, Western Europe, China and India), the tower industry in Indonesia offers an attractive mix of high EBITDA margin, low capex, no colocation discount and no obligation to provide power in the contract. The tower industry also benefits from predictable revenue due to long-term contracts and high renewal rates. Mitratel's contracted revenue based on agreements with customers for all types of leases is IDR30.7 trillion, and the average remaining life of lease agreements is 6.3 years, as of 30 June 2021. We concluded that Mitratel's fundamentals tick all the right boxes. </p>
<div class="content-highlight"><p>Our valuation analysis suggests that the IPO price range is attractive. Overall, we would participate in the IPO.</p></div>
</div>



Mitratel (1319Z IJ) is the largest telco tower owner and operator in Indonesia based on the number of telecommunication towers owned as of 30 June 2021, according to Analysys Mason. Mitratel is a subsidiary of Telekomunikasi Indonesia (TLKM IJ).

Mitratel has launched an IPO to raise IDR20.0-24.9 trillion ($1.4-1.8 billion) at the IPO price range of IDR775-975 per share. Bookbuilding will close on 4 November and the shares are set to list on 22 November. 


In Mitratel (Dayamitra Telekomunikasi) IPO Initiation: Control Tower, we noted that in comparison to other major regions (US, Western Europe, China and India), the tower industry in Indonesia offers an attractive mix of high EBITDA margin, low capex, no colocation discount and no obligation to provide power in the contract. The tower industry also benefits from predictable revenue due to long-term contracts and high renewal rates. Mitratel's contracted revenue based on agreements with customers for all types of leases is IDR30.7 trillion, and the average remaining life of lease agreements is 6.3 years, as of 30 June 2021. We concluded that Mitratel's fundamentals tick all the right boxes. 
Our valuation analysis suggests that the IPO price range is attractive. Overall, we would participate in the IPO.


Mitratel (Dayamitra Telekomunikasi) IPO: Valuation Insights

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>This week in StubWorld ...</p>
</div>
<div>
<div>
<div class="content-highlight">
<p>Cashed-up <a href="https://www.smartkarma.com/entities/ck-hutchison-holdings-ltd" target="_blank" data-smartkarma-citation="entities:132:1" rel="noopener">CK Hutchison Holdings (1 HK)</a> is in the market every day as its shares trade around all-time lows on an implied stub and simple ratio basis.</p>
</div>
</div>
</div>
<div>
<p>Preceding my comments on CKH are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
</div>
<div>
<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
</div>


This week in StubWorld ...




Cashed-up CK Hutchison Holdings (1 HK) is in the market every day as its shares trade around all-time lows on an implied stub and simple ratio basis.




Preceding my comments on CKH are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>Risk-on signals continue to pile up, which continues to support our constructive outlook. Building off of last week's report, growth Sectors such as Technology and Communications continue to improve and we recommend adding exposure (e.g., Bilibili BILI-US/9626-HK).</p>

Risk-on signals continue to pile up, which continues to support our constructive outlook. Building off of last week's report, growth Sectors such as Technology and Communications continue to improve and we recommend adding exposure (e.g., Bilibili BILI-US/9626-HK).

Global Equity Strategy: Growth Sectors Continue To Improve -- Add Exposure

European Event-Driven Analyst

Jesus Rodriguez Aguilar

<p><a href="https://www.smartkarma.com/entities/cellnex-telecom-sau" target="_blank" data-smartkarma-citation="entities:21258:1" rel="noopener">Cellnex Telecom Sau (CLNX SM)</a> has announced a €7 bn capital increase, with preferential subscription rights, in the proportion of <strong>19 new shares for 48 existing shares</strong>.</p>
<ul>
<li>
<p>This is the 4th capital increase in two years. Cellnex raised €7.7 bn in the previous ones.</p>
</li>
<li>
<p>Cellnex will issue 192.7 mn new shares at a <strong>subscription price of €36.33 per share</strong>.</p>
</li>
<li>
<p>The subscription period will <strong>begin on 31 March</strong> and will last for the next 15 calendar days.</p>
</li>
<li>
<p>All shareholders who have acquired shares up to 31 March and whose transactions have been registered in Iberclear up to 6 April 2021 (both inclusive) shall be granted preferential subscription rights.</p>
</li>
</ul>
<p>Cellnex should have the support of the market. This rights issue is not due to solvency problems. The company is buying assets at c. 11x EV/EBITDA and its shares trading at 17.2x EV/21e EBITDA. Share price weakness over the last months could be explained by the market discounting this huge rights issue.</p>
<div>
<p>Cellnex had already announced its intention to increase capital by €7 bn in February, in order to finance new acquisitions. The issue price of the new shares is in line with market expectations, hence the low impact on the share price on 30 March.</p>
<p>Cellnex presents solid fundamentals, an upside potential of over 27%, good long-term growth prospects (see Capital IQ consensus above, turning EPS positive in 2022 and maybe even in 2021) and CF profitability of more than 7.7% as of 2022 (Capital IQ consensus).</p>
<p>In addition, the capital increase will allow the company to continue buying assets worth another €11 bn in the next 18 months and generating economies of scale. Although, it should have a practically zero impact on valuation.</p>
<p>Regarding rights trading, it may happen as in previous large rights issues:</p>
<ul style="list-style-type: circle;">
<li>On the first hour of the first day of rights trading (i.e. 1 April), existing shorts (on the shares) have to deliver the rights to the borrowers, for that doing they either will have to buy the rights (presumably not many available for sale) or buy back shares at the request of corporate brokers. A pop in the shares and the rights may be expected. Some smart funds (passive funds for instance) may sell their rights at that point and buy shares in the market to avoid dilution.</li>
<li>It often happens when there is a large delivery of rights, the market is not completely ready: folks have to cover their shorts faster than existing sellers of rights could sell, and the only way to hedge market movement is by buying shares.</li>
</ul>
<p>(<em>See further in the Insight for terms</em>).</p>
</div>

Cellnex Telecom Sau (CLNX SM) has announced a €7 bn capital increase, with preferential subscription rights, in the proportion of 19 new shares for 48 existing shares.


This is the 4th capital increase in two years. Cellnex raised €7.7 bn in the previous ones.


Cellnex will issue 192.7 mn new shares at a subscription price of €36.33 per share.


The subscription period will begin on 31 March and will last for the next 15 calendar days.


All shareholders who have acquired shares up to 31 March and whose transactions have been registered in Iberclear up to 6 April 2021 (both inclusive) shall be granted preferential subscription rights.


Cellnex should have the support of the market. This rights issue is not due to solvency problems. The company is buying assets at c. 11x EV/EBITDA and its shares trading at 17.2x EV/21e EBITDA. Share price weakness over the last months could be explained by the market discounting this huge rights issue.

Cellnex had already announced its intention to increase capital by €7 bn in February, in order to finance new acquisitions. The issue price of the new shares is in line with market expectations, hence the low impact on the share price on 30 March.
Cellnex presents solid fundamentals, an upside potential of over 27%, good long-term growth prospects (see Capital IQ consensus above, turning EPS positive in 2022 and maybe even in 2021) and CF profitability of more than 7.7% as of 2022 (Capital IQ consensus).
In addition, the capital increase will allow the company to continue buying assets worth another €11 bn in the next 18 months and generating economies of scale. Although, it should have a practically zero impact on valuation.
Regarding rights trading, it may happen as in previous large rights issues:

On the first hour of the first day of rights trading (i.e. 1 April), existing shorts (on the shares) have to deliver the rights to the borrowers, for that doing they either will have to buy the rights (presumably not many available for sale) or buy back shares at the request of corporate brokers. A pop in the shares and the rights may be expected. Some smart funds (passive funds for instance) may sell their rights at that point and buy shares in the market to avoid dilution.
It often happens when there is a large delivery of rights, the market is not completely ready: folks have to cover their shorts faster than existing sellers of rights could sell, and the only way to hedge market movement is by buying shares.

(See further in the Insight for terms).


<p>Telxius, a subsidiary of <a href="https://www.smartkarma.com/entities/telefonica-sa" target="_blank" data-smartkarma-citation="entities:21299:1" rel="noopener">Telefonica SA (TEF SM)</a> (50% Telefonica, 40% KKR, 10% Pontegadea) reached an agreement with Boston-based <a href="https://www.smartkarma.com/entities/american-tower-corp" target="_blank" data-smartkarma-citation="entities:6365:1" rel="noopener">American Tower (AMT US)</a> to sell its entire tower unit (30,722 sites across Argentina, Brazil, Chile, Germany, Peru and Spain).</p>
<ul>
<li>The EV is €7.7 bn including the remaining payments to be done by Telxius to <a href="https://www.smartkarma.com/entities/telefonica-deutschland-holding" target="_blank" data-smartkarma-citation="entities:21687:1" rel="noopener">Telefonica Deutschland Holding (O2D GR)</a> to complete the German transaction.</li>
<li>The price is 30.x EBITDA, above the usual 23x.</li>
<li>Telefónica will reduce its debt by €4.6 bn, 12.5% of the total.</li>
<li><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">Debt reduction and pending corporate operations provide the group with sufficient liquidity to maintain its commitment to shareholders for the time being.</span></li>
</ul>
<p><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">In the current context, Telefonica focuses on the management of FCF to preserve the payment of the dividend, by reducing investments. The dividend remains at €0.4 per share and debt, one of the group's main drawbacks, fell c.15% LTM. In the long term, the potential for structural growth is low, competition high, and room to maneuver limited. The current environment makes it difficult to sell non-strategic assets at adequate prices and questions the sustainability of the dividend.</span></p>
<h3><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">Recommendation</span></h3>
<p><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1"><strong>Telefonica</strong>: DCF valuation is <strong>€4.2</strong> (Capital IQ consensus, WACC 6.4%, g 0.3%).</span></p>
<ul>
<li><span data-language-for-alternatives="en" data-language-to-translate-into="es" data-phrase-index="1">The sale of Telxius may support market expectations for a potential acceleration in the execution of the strategic reshuffle announced by management, thus leading to a re-rating of the company.</span></li>
<li>But there are risks: slower deleverage, lower economic growth in Spain (24% of EBITDA), macro deterioration and currency depreciations in Central and South America (c. 15% of EBITDA). Positive surprises may come from further disposals at high multiples thus leading to faster deleverage, better than expected economic growth in Central and South America and a reduction of the (so far unsustainable) dividend.</li>
</ul>
<p><strong>Cellnex</strong>, reiterate <strong>TP</strong> of <strong>€64.36</strong>. Cellnex could become the object of a take-over.</p>

Telxius, a subsidiary of Telefonica SA (TEF SM) (50% Telefonica, 40% KKR, 10% Pontegadea) reached an agreement with Boston-based American Tower (AMT US) to sell its entire tower unit (30,722 sites across Argentina, Brazil, Chile, Germany, Peru and Spain).

The EV is €7.7 bn including the remaining payments to be done by Telxius to Telefonica Deutschland Holding (O2D GR) to complete the German transaction.
The price is 30.x EBITDA, above the usual 23x.
Telefónica will reduce its debt by €4.6 bn, 12.5% of the total.
Debt reduction and pending corporate operations provide the group with sufficient liquidity to maintain its commitment to shareholders for the time being.

In the current context, Telefonica focuses on the management of FCF to preserve the payment of the dividend, by reducing investments. The dividend remains at €0.4 per share and debt, one of the group's main drawbacks, fell c.15% LTM. In the long term, the potential for structural growth is low, competition high, and room to maneuver limited. The current environment makes it difficult to sell non-strategic assets at adequate prices and questions the sustainability of the dividend.
Recommendation
Telefonica: DCF valuation is €4.2 (Capital IQ consensus, WACC 6.4%, g 0.3%).

The sale of Telxius may support market expectations for a potential acceleration in the execution of the strategic reshuffle announced by management, thus leading to a re-rating of the company.
But there are risks: slower deleverage, lower economic growth in Spain (24% of EBITDA), macro deterioration and currency depreciations in Central and South America (c. 15% of EBITDA). Positive surprises may come from further disposals at high multiples thus leading to faster deleverage, better than expected economic growth in Central and South America and a reduction of the (so far unsustainable) dividend.

Cellnex, reiterate TP of €64.36. Cellnex could become the object of a take-over.

Spain

Cellnex Telecom S.A.U. is an independent operator of wireless telecommunications infrastructure and broadcast infrastructure. The Company's sites are located in Spain and Italy.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Cellnex Telecom Sau (CLNX SM)

Mitratel (Dayamitra Telekomunikasi) IPO: Valuation Insights

Mitratel has launched an IPO to raise $1.4-1.8 billion. Our valuation analysis suggests that the IPO price range is attractive. Overall, we would...

Arun George

StubWorld: CK Hutch's Ongoing Buybacks

CKH looks cheap here priced at 6.8x/0.4x forward PE/PBR, together with a 50% discount to NAV. Expect buybacks to continue. Recommend an outright...

David Blennerhassett

Global Equity Strategy: Growth Sectors Continue To Improve -- Add Exposure

Building off of last week's report, growth Sectors such as Technology and Communications continue to improve and we recommend adding exposure...

Vermilion Research

Cellnex: Serial Rights Issuer

With solid fundamentals, Cellnex should have market support. A pop in the shares and the rights is to be expected at the very beginning of rights...

Jesus Rodriguez Aguilar

Telefonica's Disposal of Telxius

Telefonica manages FCF to preserve the divi, by reducing investments. Debt fell c.15% LTM. Structural growth potential is low, competition high,...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)