Telkom Indonesia (TLKM IJ/Maintain) - The Second Handover

TLKM is separating its wholesale fiber business into PT Telkom Infrastruktur Indonesia (InfraNexia) across two stages. Phase 1, effective Jan-26, transferred IDR48.9tr of assets and IDR13.3tr of liabilities at an appraised value of IDR35.8tr. Phase 2, tabled for the 30 September EGMS, moves a further IDR29.2tr of assets valued at IDR49.9tr, or 33% of FY25 equity, against 498.6mn new TIF shares. Combined, InfraNexia holds IDR78.0tr of assets generating IDR24.8tr of revenue and IDR16.9tr of EBITDA, valued at 5.9x EV/EBITDA. Consolidated financials are unchanged. Phase 1 carried the access fiber (490k km) and backbone (80k km), with the remaining domestic subsea assets (25k km) moving in Phase 2.

We mark it materially higher. Global fiber carve-outs have cleared at 12.8x: Telstra 28.0x, TPG/Vocus 11.2x, MORA/MyRepublic 10.2x and TIM FiberCop 8.6x. We apply a 30% discount for InfraNexia's c.40% utilization and internally sourced revenue mix, giving a 9.0x base for our stake sale assumption. On adjusted EBITDA of IDR17.5tr including TIF standalone, that implies EV of IDR157.9tr and equity of IDR145.7tr after IDR12.3tr of net debt, or 54.3% of TLKM's current market cap.

A 25% stake sale at 9.0x implies gross proceeds of IDR36.4tr. After 1% advisory costs and IDR16.7tr of book carrying value, the taxable gain is IDR19.3tr and tax at 22% IDR4.2tr, leaving net cash of IDR31.8tr. At a 50% payout that is IDR15.9tr, or a special DPS of IDR161, a 5.9% yield at the last price of IDR2,710, on top of the ordinary dividend. Across 15-35% stakes and 7.0-11.0x, special DPS spans IDR76-273 (2.8-10.1% yield), while flexing payout from 30% to 70% at a 25% stake gives IDR96-225. DPS is more sensitive to stake size and payout than to the multiple.

We maintain our forecasts pending further clarity on the divestment and use of proceeds. We view the move positively, unlocking synergies and monetization potential with new investors who can bring incremental business to the group. This aligns with TLKM's streamlining strategy and focus on core operations, which should lift profitability on a leaner balance sheet. We reiterate our BUY call with a TP of IDR3,400, implying 4.2x FY27F EV/EBITDA. Risks: delays to the divestment and execution risk at InfraNexia.