Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/link-net-tbk-pt" target="_blank" data-smartkarma-citation="entities:1050:1" rel="noopener">Link Net (LINK IJ)</a> is a broadband and cable TV provider in Indonesia. It is undervalued under all scenarios with 54% upside to the 2021 fair value per share in bear case and 143% upside to the 2021 fair valuer per share in the base case.The company recently embarked on a new subscriber growth strategy, which so far has been successful. Over the past two quarters, Link Net added an average of 58,154 new subscribers per quarter. Over the previous five years, the average quarterly rate of new subscribers was 12,232. ARPU fell with the subscriber growth, but it seems to be stabilizing.In addition to the new subscriber growth strategy, the company is an efficient operator with a five-year average ROIC of 24%. It also regularly buys back shares when it thinks the company is undervalued. Since IPO in 2014, 9.6% of shares issued have been repurchased with most being canceled.The company also has room to increase the amount of debt in its capital structure. At 3 times EBITDA, Link Net could raise debt by IDR5.5 trillion, which is just below its current market cap of IDR6 trillion.Trading on a EV/TTM EBIT of 5.8 times, Link Net is attractive at current valuations.

Link Net (LINK IJ) is a broadband and cable TV provider in Indonesia. It is undervalued under all scenarios with 54% upside to the 2021 fair value per share in bear case and 143% upside to the 2021 fair valuer per share in the base case.The company recently embarked on a new subscriber growth strategy, which so far has been successful. Over the past two quarters, Link Net added an average of 58,154 new subscribers per quarter. Over the previous five years, the average quarterly rate of new subscribers was 12,232. ARPU fell with the subscriber growth, but it seems to be stabilizing.In addition to the new subscriber growth strategy, the company is an efficient operator with a five-year average ROIC of 24%. It also regularly buys back shares when it thinks the company is undervalued. Since IPO in 2014, 9.6% of shares issued have been repurchased with most being canceled.The company also has room to increase the amount of debt in its capital structure. At 3 times EBITDA, Link Net could raise debt by IDR5.5 trillion, which is just below its current market cap of IDR6 trillion.Trading on a EV/TTM EBIT of 5.8 times, Link Net is attractive at current valuations.

Link Net (LINK:IJ)- New Subscriber Growth Strategy Working. The Company Is Undervalued.