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

Sarana Menara Nusantara / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/6848" target="_blank" data-smartkarma-citation="entities:6848:1">Sarana Menara Nusantara Pt (TOWR IJ)</a> (SMN) is the largest independent tower operator in Indonesia. Switching costs, economies of scale, and guaranteed long-term contracts within the industry are offset by strong bargaining power of suppliers and customers. The presence of economies of scale and switching costs should lead to consolidation in the industry with the largest independent tower companies gaining share and bargaining power. Among the large independent tower companies, SMN is best positioned to take advantage of growth opportunities, as it is the most conservatively financed, the most operationally efficient and the most capital efficient tower company. The tower industry should continue to grow with the 4G network rollout estimated to be only 15-20% and annual price escalation tied to Indonesian CPI within contracts. Operating leverage should allow profit to grow faster than revenue growth. </p><p>Despite the business quality and growth outlook, the company trades on a EV/EBITDA of 9.45 times. A conservative base case with a revenue CAGR of 4.9% over the next ten years along with conservative capital efficiency assumptions leads to 18% upside in 2018 and 68% upside over the next five years making SMN an attractive investment opportunity.</p>

Sarana Menara Nusantara Pt (TOWR IJ) (SMN) is the largest independent tower operator in Indonesia. Switching costs, economies of scale, and guaranteed long-term contracts within the industry are offset by strong bargaining power of suppliers and customers. The presence of economies of scale and switching costs should lead to consolidation in the industry with the largest independent tower companies gaining share and bargaining power. Among the large independent tower companies, SMN is best positioned to take advantage of growth opportunities, as it is the most conservatively financed, the most operationally efficient and the most capital efficient tower company. The tower industry should continue to grow with the 4G network rollout estimated to be only 15-20% and annual price escalation tied to Indonesian CPI within contracts. Operating leverage should allow profit to grow faster than revenue growth. Despite the business quality and growth outlook, the company trades on a EV/EBITDA of 9.45 times. A conservative base case with a revenue CAGR of 4.9% over the next ten years along with conservative capital efficiency assumptions leads to 18% upside in 2018 and 68% upside over the next five years making SMN an attractive investment opportunity.

Sarana Menara Nusantar (TOWR:IJ) The Leading Indonesian Tower Company at Attractive Valuations