PT Sarana Menara Nusantara Tbk ("SMN"), the parent company of Protelindo, iForte and most recently KIN, announced second quarter results today. Revenue grew by 8.5% from the same period in 2017 to IDR 1,442.8 billion while EBITDA grew 7.1% year on year to IDR 1,217 billion. SMN's solid growth was driven by income from more than 1,300 new leases that came on line in the first half of 2018 and was supported by one month of additional revenue from the completion of the acquisition of KIN that occurred at the end of May 2018. “We are beginning to see the benefit of additional revenue from KIN in the second quarter but will only begin to realize the full impact of additional KIN revenue in the second half of 2018," stated Bapak Aming Santoso, President Director of SMN, "We also expect to begin seeing cost savings as we realize synergies on operations between Protelindo, iForte and KIN going forward." On a normalized basis, with KIN annual revenue of approximately IDR 325 billion per annum, the revenue run-rate for the month of June 2018 is approximately 12.9% higher than in March 2018.
The consolidated SMN Group owned 16,790 towers as of June 30, 2018 with additional organic build-to-suit growth of 807 towers at Protelindo and the inclusion of 1,369 towers that are owned by KIN. As of the end of the second quarter the SMN Group has 27,918 tenants, up from 25,011 at the beginning of the year, due to the addition of 935 new leases and 1,972 additional leases from the KIN acquisition. “We continue to grow quite strongly as we work with our partners to support the expansion of their networks and strengthening their capacity," added Bapak Aming Santoso, "We believe the recent results from the prepaid SIM card re-registration in the first half of the year will help the industry focus on the end to end customer experience. Our broad network and wide array of communications infrastructure solutions allows us to work closely with our partners to meet their needs and those of their customers." The SMN Group expects to see the number of new leases continue to grow in the second half as the churn rate, defined as the cancellation of a lease upon expiry without a new lease to replace the expiring lease, is lower than in 2017 and within indicative industry standards of around 3%. "We have reached agreement on the rollover of several leases coming due this year which will positively support earnings. We expect to begin realizing revenue from the completion of the 1,100 lease orders in the pipeline during the second semester of this year,” concluded Bapak Aming Santoso.
The SMN Group recorded a net income of IDR 560.8 billion in 2Q18, an increase of 8.1 percent compared to 1Q18. Accumulated net profit through the first half is IDR 1,080 billion. Net income in the first half is similar to the first half of 2017 mostly due to higher interest expense, losses on foreign exchange translation and continued provisioning against revenue through June 2018. “We expect net income to improve in the second half as the currency has stabilized and we now hold substantial foreign currency denominated cash," said Bapak Adam Gifari, Vice President Director of the SMN Group, "We reached an asset settlement on doubtful accounts effective in the second half of the year that will reduce the need for further provisioning and may lead to a write back on reserves." Bapak Adam Gifari continued, "We will continue to return capital to our shareholders by maintaining our sustainable dividend policy and are planning to launch a share buyback program for which we are seeking approval in an extraordinary shareholder meeting to be held August 10, 2018."
The SMN Group posted a net debt to annualised EBITDA ratio of 1.9x at the end of 2Q18, a slight increase from the 1.5x ratio reported in the previous quarter. “We will deploy the Company’s capital conservatively while maintaining our industry leading ratings and our ongoing financial flexibility in a consolidating market." concluded Bapak Adam.
SMN is traded under the ticker "TOWR" on the Bursa Efek Indonesia.