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Post Election Recovery

It's not a secret anymore that most investors are in thirst of trading ideas. Some of the 1Q24 earnings result hasn't really been a music to investor's ears as how they first expect it to be. Even some powerhouse of the industry missed to achieve its guidance as can be seen from the financial sector.


Aside from the global issues, recent unstable domestic politics during the election period hampered businesses to floor the throttle in expanding their business.



Due to this circumstance, we believe bottom up is the current key approach for investing, considering the global uncertainties is heading nowhere near the end. We saw that even amidst the accute geopolitical tension, a surprise in earnings may just happen, just like what happened to JPFA recently.


Therefore, with a deep research and thorough analysis, we believe some stocks can still lead us to outperform JCI. In today's case, we believe MTDL is one of the stock worth watching for.


Source: Sucor Research


MTDL's 1Q24 earnings stood at IDR148bn (+0.9% YoY/-69% QoQ). This slowdown was mainly caused by two main factors. Firstly, the decrease in the Solution and Consulting (S&C) business amidst election-related uncertainty, and secondly, lower distribution gross margin which was driven by a higher contribution from the lower-margin telco segment. Meanwhile the quarterly slowdown was mainly just a typical business seasonality.


We project 2024 earnings to reach IDR766bn (+18% YoY). The growth is likely to be driven from the recovery in both Solution and Consulting segment, and commercial segment of the distribution business. We also see that the rebound in consumer distribution of PC and notebooks is likely to play an important role as well.


Source: Company, Sucor Research


MTDL is strategically positioned to benefit from the growing digitalization trend in Indonesia. The company is doubling down its solution and consulting (c. 24% revenue contribution) through both organic and inorganic strategies.


Meanwhile, the distribution business which contributes c. 76% of MTDL's revenue, also poised to grow following the growing use of ICT products.


MTDL has been appointed to resell FPT IS product in Indonesia, while discussion on establishment of a joint venture to provide software outsourcing development services is still underway.



We see that MTDL is likely to have robust free cashflow generation on the back of strong earnings performance which coupled with low capex and stable working capital requirements. Our analyst project that MTDL will generate free cashflow of IDR239bn 2024F, which allows the company to strengthen its balance sheet with net cash to equity potentially reaching 0.3x 2025F, assuming no M&A activity.



We reiterate BUY call on MTDL with TP of IDR 840, implying 13.5x forward PE. However, despite our conviction that MTDL can perform better going forward, due to its current daily transaction volume, we suggest to adjust the weight accordingly should one consider going long on the stock


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