RVAM Comments On Link Net

River Valley Asset Management (RVAM) recently published their July 2017 newsletter, which is available for download from their website. RVAM is a Singapore-based boutique asset management firm (their flagship fund is the River Valley Core Compounding Fund, launched in 2014). The firm was founded by Homiyar Vasania, who was previously part of Morgan Stanley’s emerging markets investment team.

The July newsletter includes the investment team’s reflections on the ASEAN region twenty years on from the Asian Financial Crisis. They also cover the impending ASEAN infrastructure investment boom and the CLMV (Cambodia, Laos, Myanmar and Vietnam) opportunity. Worth a read.

One of the companies they discuss in the letter is Link Net, a provider of high speed broadband and cable TV services in Indonesia. It was previously backed by CVC and the Lippo Group. Link Net is primarily focused on high-end, affluent subscribers and has a first mover advantage in key larger cities. The company has a long growth ramp given overall penetration rates for both its services are low in Indonesia (currently ~9% for broadband and ~11% for cable TV).

According to RVAM, “the company’s strategy is not to be the largest but to focus on the most profitable customer segment which is ready to pay for quality. This is visible in the margins they generate and return on equity which is close to 20%.” Link Net has a disciplined plan to grow its customer base and, given its profitability, generate significant free cash flow. The company’s shares currently trade at ~15x earnings and ~7x EV/EBITDA.