J.P. 摩根-亚太地区-电信服务业-澳大利亚电信服务与互联网行业分析-2019.6.10-59页.pdf

Australia Telecom Services and InternetTelecom Services,Media and InternetEric Pan,CFA AC+61 2 9003 8207 Bloomberg JPMA EPANJ.P.Morgan Securities Australia LimitedSee the end pages of this presentation for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Asia Pacific Equity Research10 May 2019AgendaPageTelecom Services4Investment Recommendations 6Mobile Overview7-13Fixed Overview14-19Telstra20-23TPG Telecom24-26NextDC27-30Vocus31-33InternetInvestment Recommendations34Online Advertising in Australia 35-37Seek38-41REA Group42-45Domain46-48Carsales49-52News Corp53-55Global Telecom Service ComparisonSource:Company,Bloomberg,J.P.Morgan estimates.Priced as of 10 May 2019.Australia Telecom OverviewMobile has three major playersFixed has four major players17.3%of industry revenue(Merged with Hutchisons 3 in 2009 to create Vodafone Hutchison Telecom Australia,50/50 joint venture)53.1%of industry revenue29.5%of industry revenue(Optus is a wholly owned subsidiary of Singtel)67.3%of industry revenue6.4%of industry revenue15.0%of industry revenue11.3%of industry revenue1H19 Mobile revenue share1H19 Fixed revenue shareSource:Company reports,J.P.Morgan estimatesSource:Company reports,J.P.Morgan estimatesVocusTPGTelstraTelstraInvestment OutlookMobile:Opportunities:Australia remains one of the more attractive mobile markets in the world due to its three-player industry structure.Postpaid segment is expected to continue to benefit from strong population growth,prepaid to postpaid migration and increasing data usage,adding 300-400k total mobile subscribers annually.Risk:Pending court ruling for Vodafone and TPG merger has the potential to create a stronger 3rdmobile player but all but eliminates a 4thnew entrantFixed:Opportunities:Australias fixed broadband market is one of the more lucrative markets in the world due to metered data pricingNBN migration is expected to accelerate fixed broadband penetration over the next 3-4 years,adding 300-500k broadband subscribers annuallyRisk:Margin pressure as incumbents become resellers and new entrants come inInvestment RecommendationsTelstra Ticker TLS,$39.9bn market cap;Overweight,$3.55 Jun-20 PT,6%upsidePotential VHA/TPG merger eliminates the threat of a new 4thmobile entrant and should benefit the incumbent the most.Potential write down of the NBN by the Labor government will be positive for fixed broadband marginsInfraCo spin now sounds more likely than not as its the optimal acquirer of the NBN,which could yield significant synergies that will accrue to TLS shareholders.NextDC Ticker NXT,$2.2bn market cap;Overweight,$8 Jun-20 PT,27%upsideContinued huge growth in data and cloud computing remains a secular tailwind for data centersNXT operates best-in-class facilities with Tier IV certification on its second-gen data centers,which allows it to offer a higher quality product at the same cost of Tier III data centers.TPM Ticker TPM,$5.9bn market cap;Overweight,$6.90 Jun-20 PT,9%upside We expect TPG is likely to win declaratory relief in the Federal Court on the TPG-VHA merger.We estimate 80%likelihood of merger approval in the Federal Court.Merger with VHA should create a strong 3rdmobile player to Telstra and Optus.We estimate a$7.25 merged valuation.Fixed wireless broadband opportunity could expand consumer broadband margins.Vocus Ticker VOC,$2.4bn market cap;Neutral,$4.25 Jun-20 PT,8%upside 30,000km of underutilized national fiber assets in Australia and NZ.Potential for better revenue growth/market share gain from new marketing strategies as management looks to double Enterprise revenue in 5 years.Source:Company,Bloomberg,J.P.Morgan estimates.Prices as of May 9,2019P/EEV/EBITDAPricePTFY19EFY20EFY19EFY20EOWTLS$3.34$3.5515.9x13.0 x6.4x6.0 xNXT$6.30$8NMNM26.0 x18.8xTPM$6.35$6.9030.7x22.2x7.2x7.7xNVOC$3.93$4.2557.5x38.4x9.8x9.2xMobile Overview:Investment PointsThough mature and arguably close to fully penetrated,there is still room for growth in both postpaid subscribers and ARPU.Australias 3-carrier industry is less price competitive and the operating environment is generally more benign than the rest of the world.Steady population and economic growth should bode well for increased subscriber growth.We forecast total mobile subscribers to grow 1.5%,or 300-400k,annually over the next few years with most of the growth to come in the postpaid segment.Postpaid penetration growth,helped by prepaid migration,will boost overall ARPU as prices are much higher than prepaid($100 vs.$30).Consumer habits shifting to mobile should continue to drive increased mobile data usage and ARPU growth.Telstra dominates the industry with 49%of subscribers,53%of revenues,and 58%of EBITDA.Mobile Industry Subscriber Share(1H19)Mobile Industry Revenue Share(1H19)Mobile Industry EBITDA Share(1H19)Source:Company reportsSource:Company reportsSource:Company reports.J.P.Morgan estimatesMobile Overview:Investment RisksInvestment risksHeightened competition in prepaid from MVNOs pressuring ARPU and has the potential to bleed into postpaid.Continued postpaid competition among the Big Three means high level of investments to continue.A combined TPG-VHA would pose a strong 3rdplayer.Postpaid Market ShareSource:J.P.Morgan estimates,Company data.Note:Vodafone Australia reclassified its subscriber numbers in FY14 so data may not be consistent.Total Mobile Subscriber Growth and Penetration EstimateSource:J.P.Morgan estimates,Company data.Mobile Global comparison paints a rosy Australian marketThe Australian Mobile market is less competitive than other mature markets in developed countries due to a 3-player market Growth in the Australian market is also attractive in terms of above average population growth of 1.5%(vs.world average of 1.2%and 70%market shareTelstra dominates the corporate/enterprise space with 70%of the industry revenues.Its status as the legacy incumbent telco has allowed it to dominate the enterprise space.Small and Medium Businesses(SMB)remains an opportunity for smaller playersSMBs do not require the same level of network and product sophistication as large enterprises and therefore can be an opportunity for the smaller telcos.We estimate growth in the segment will be mainly driven by SMBs as they ratchet up their telecommunications spend for faster broadband speeds and video conferencing capabilities.We estimate the overall corporate/enterprise segment to decline at 0-4%over the next few yearsEnterprise Revenue Market Share(1H19)Source:J.P.Morgan,company dataSource:J.P.Morgan,company dataEnterprise Industry Revenue GrowthTelstra Investment OverviewInvestment pointsSignificant brand value and network quality helps it to maintain significant market share and price premium in mobile and fixed broadband.We expect the proposed TPG-VHA merger to eliminate the prospect of a new mobile entrant.Potential write down of the NBN by the Labor government will be positive for fixed broadband margins,potentially tripling what Telstra currently earns.InfraCo spin now sounds more likely than not as its the optimal acquirer of the NBN,which could yield significant synergies that will accrue to TLS shareholders.Investment risksCompetitive Mobile and NBN environment could further pressure ARPU and market share.Revenue Breakdown(1H19)Source:J.P.Morgan estimates Price as of 8 May EBITDA Breakdown(FY19)Source:J.P.Morgan estimates,Company data.P/EEV/EBITDAPricePTFY19EFY20EFY19EFY20EOW$3.34$3.5515.9x13.0 x6.4x6.0 xSource:J.P.Morgan estimates,Company data.Revenue Growth EstimatesSource:J.P.Morgan estimates,Company data.Telstra Mobile to contribute 50%of profits by FY23,up from 40%Mobile is Telstras largest and most profitable business and will continue to become a more significant portion as fixed declines due to the NBN migration.It generated$5.3bn in revenues and$1.9bn in EBITDA in 1H19,accounting for 42%and 45%of recurring total,respectively.Postpaid accounted for 70.5%of mobile service revenues,which is expected to decline over the FY20-21 as ARPU declines,offset somewhat by subscriber growth.Prepaid accounted for 12%of mobile revenues and we expect it to decline going forward due to postpaid migration and increased MVNO competition.Mobile broadband accounted for 9.3%of mobile service revenues and we expect low-medium double-digit declines going forward due to declining ARPUs.Wholesale and Machine-to-Machine accounted for 5.2%of mobile service revenues and we expect to grow in the low double-digits to high single-digits.We expect the mobile segment to contribute 50%of profits by FY23,at the end of the NBN rollout.Total Mobile Subscriber Growth EstimatesMobile Service Revenue Growth Estimates(excl.equipment revenue)Source:J.P.Morgan,company dataSource:J.P.Morgan,company dataTelstra Fixed to contribute 7%of profits by FY23,down from 12%Fixed is the second largest revenue contributor.It generated$2.7bn in revenues(19.4%of total income)and$0.7bn in EBITDA(11.7%of total)in 1H19.We expect Fixed voice revenue to decline from$2.6bn in FY18 to$1.1bn by the end of the NBN rollout in FY23.Fixed data revenue is estimated to decrease from$2.5bn in FY18 to$2.3bn in FY23&margins will moderate at 15%from FY23 onwards as it moves from owners economics to a reseller.We estimate Telstra to hold broadband market share during the NBN migration,going from 48.6%in 1H19 to 48.5%in FY23.NAS currently contribute 0.9%of recurring EBITDA and Global Connectivity contributes 3.6%of EBITDA and are estimated to contribute 7.8%and 4.3%each by FY23 as the company invests in global enterprise capabilities.Fixed Data Subscriber EstimatesFixed Revenue and EBITDA EstimatesSource:J.P.Morgan estimates,Company data.Source:J.P.Morgan estimates,Company data.Telstra Financial OutlookWe currently expect the company to be unable to make up the$3bn EBITDA headwind from the NBN migration,with EBITDA(recurring)coming in at$7.3bn in FY22 vs.$10.5bn in FY15We expect recurring revenues excluding non-recurring NBN payments to be relatively stable.However,EBITDA is expected to decline significantly as a result of the NBN migration.We estimate$27.56bn in revenues and$9.2bn in EBITDA in FY19,in-line with guidance.We model capex intensity at 17%of total revenue in FY19,also in-line with guidance,due to the additional investments in the business,and 14%thereafter.Underlying EPS ex-non-recurring NBN is estimated at$0.107 in FY19,down from$0.20 in FY18,and estimated grow to$0.179 by FY23.As the NBN migration filters through Telstras margins,we currently estimate Telstra to cut its dividend to$0.16 over FY19-25.However,the FCF generation is healthy and theres the potential for capital returns in the form of share buybacks.EPS vs.DPS EstimatesFree Cash Flow EstimatesSource:J.P.Morgan estimates,Company data.Source:J.P.Morgan estimates,Company data.TPG Investment PointsInvestment opportunityMerger with VHA is still the best path forward for TPM despite the delay and uncertainty(we estimate 80%likelihood of a merger approval in the Federal Court).We estimate a$7.25 valuation for the combined TPG-VHA entity.TPG is one of the better operators in Fixed with a tenacious focus on costs and efficiency.NBN write down could potentially lift TPGs marginsFTTB and Corporate growth could help offset declining consumer broadband margins.Downside risks:The merger does not approval in court.Lower opex synergies than our current$200m annual estimateSource:J.P.Morgan,company dataTPG 1H19 Revenue BreakdownTPG 1H19 EBITDA BreakdownSource:J.P.Morgan,company dataSource:J.P.Morgan estimates Price as of 10 MayP/EEV/EBITDAPricePTFY19EFY20EFY19EFY20EOW$6.35$6.9030.7x22.2x7.2x7.7xTPG Fixed broadband is its bread and butterConsumer segment accounted for 69%of 1H19 revenues with the rest coming from CorporateWhile we currently assume increasing market share at TPG through the NBN migration,we estimate Consumer EBITDA margins will decline from 30%in FY18 to 22%by FY22,due to increased network costs as customers migrate to NBN.FTTB presents an opportunity to offset some of the NBN headwindsFixed wireless could be used to circumvent the NBNCorporate segment expected to grow in the low single-digits,except for FY19 and FY20 where it gets a boost from Vodafone backhaul revenues.TPG Corporate Revenue and EBITDA MarginSource:J.P.Morgan,company dataTPG Consumer Broadband Subscriber Growth EstimatesSource:J.P.Morgan,company dataTPG Financial Outlook-StandaloneRevenue and EBITDA expected to grow in the mid-to-high single digits after FY19.We estimate revenues to decline by 1.7%in FY19 to$2.45bn and EBITDA to decline by 2.6%to$819m,in-line with guidance.Capital intensity is expected to be 28.3%of revenues in FY19 before subsiding due to the mobile network builds.We estimate net debt to EBITDA to peak at 2.42x in FY20.TPG EBITDA Growth EstimatesTPG Revenue Growth EstimatesSource:J.P.Morgan,company dataSource:J.P.Morgan,company dataNXT Investment PointsInvestment opportunityNextDC operates best-in-class facilities in an industry with high barriers to entryContinued exponential growth in data and cloud computing remains a secular tailwind for data centersGlobal expansion by large data center operators could drive industry M&ADownside risks:Capacity sell-through of second-generation data centers is slower than expectedIncreased industry supply could pressure pricingHyperscale cloud operators could decide to build their own data centers insteadSource:J.P.Morgan,company dataNXT 1H19 DC Services Revenue NXT EBITDA GrowthSource:J.P.Morgan,company dataP/EEV/EBITDAPricePTFY19EFY20EFY19EFY20EOW$6.30$8NMNM26.0 x18.8xSource:J.P.Morgan estimates Price as of 8 MayNXT Data Center Revenue GrowthSource:J.P.Morgan,company dataNXT Contracted Utilisation and Built Capacity(2ndGen DCs)M2 We estimate M2 will reach its Planned Capacity of 40MW in FY25 with 5MW annual increments from FY19-FY25.And contracted utilisation of 12%in FY19 and reaching 25%in FY20 with 15%annual increments from FY20-25 till it reaches 90%in FY25.S2 We estimate S2 will reach its Planned Capacity of 30MW in FY20 with 14MW in FY19 and 30MW in FY20.And contracted utilisation of 50%in FY19,65%in FY20,80%in FY21,90%in FY22 and 93%from FY23 onwards.B2 We estimate B2 will reach its Planned Capacity of 12MW in FY23 with 2MW annual increments from FY19-FY23.And contracted utilisation of 13%in FY19 and reaching 25%in FY20 with 15%annual increments from FY20-24 till it reaches 90%in FY24.Source:J.P.Morgan,company dataSource:J.P.Morgan,company dataNXT Total Contracted UtilisationNXT Total Built CapacityNXT Financial OutlookRevenue and EBITDA expected to grow in the mid-to-high double digits after FY18.We estimate revenues to grow by 14.5%in FY1