Company Reports

Inwit reported a steady fourth quarter with 12.1% organic revenue growth. Inwit deployed 4,200 new points of presence and only 905 new towers in 2023, resulting in an expansion in tenancy ratios from 2.16 tenants per tower one year ago to 2.23 today. Operating leverage keeps flowing to the EBITDA after leases profit line, which grew by 13.4% in the quarter, with margins expanding 80 basis points year on year to 72.3%. New services revenue for indoor cells, which are used to boost wireless signals in indoor spaces, keeps growing strongly, up 90% year on year, although it only represents 5% of the group’s revenue. We maintain our EUR 12.60 fair value estimate and see 20% upside for the shares at this point. Investors in Inwit get exposure to a company with double-digit revenue growth, healthy tenancy ratios and market dynamics, high EBITDAal margins, and growing dividends. Management will pay a EUR 0.48 dividend per share this May and expects an increase to EUR 0.52 in 2025 and EUR 0.60 in 2026. Inwit’s net debt/EBITDAaL ratio was 4.4 times this quarter as the company keeps deleveraging its balance sheet, thanks to EBITDAaL growth.

Inwit’s strategy is to remain a local tower player in Italy, growing organically as Telecom Italia and Vodafone deploy new equipment on existing towers and new built-to-suit (BTS) towers to cover white spots (areas with poor coverage). Telecom Italia and Vodafone have already committed to deploy more than 12,000 new tenancies from 2021 to 2026, approximately 8,000 on existing towers and almost 5,000 on new towers, which should result in tenants per tower (the tenancy ratio) getting above the 2.5 range, also aided by other tenants (Iliad and Wind Tre, and other nonmobile tenants like utility companies) also deploying new equipment in Inwit’s towers. We estimate Inwit will keep deploying new capital at double-digit internal rates of return through BTS towers, distributed antenna systems, and fiber-to-the-tower projects.

Inwit is well positioned to close a very strong 2023. In the third quarter, it reported organic revenue growth of 12.6% (12.8% last quarter) and 18.5% growth in EBITDAaL (16.7% last quarter). It expects to close the year in the low end of its revenue range but with EBITDA after leases and free cash flow above guidance. The tenancy ratio kept expanding and reached 2.21 tenants per tower compared with 2.20 times last quarter and 2.12 times one year ago. Going forward, we expect the tenancy ratio will keep growing, resulting in further operating leverage. We are maintaining our EUR 12.60 fair value estimate and believe this is a good opportunity for investors to invest in a defensive, high-quality name, with growing revenue, profits and dividends.

After a long stretch of overvaluation, sentiment around the wireless tower industry has swung the other way. Each of the five independent tower firms we cover globally is now undervalued relative to our fair value estimates and trading in a 4- or 5-star range. Though the stocks have been volatile, especially around interest rate movements, we haven’t seen much change to the companies’ fundamentals. We believe tower firms have long-term secular tailwinds, great business models that include contractual recurring revenue with annual escalators, and narrow moats. In our view, the market has presented a compelling opportunity.

Inwit reported another steady quarter with 12.8% organic revenue growth and 16.7% growth in EBITDAaL. In the last 12 months, Inwit has deployed 670 new towers for its two main anchor tenants Telecom Italia and Vodafone and also deployed new equipment in existing towers for densification that is required for 5G networks. This has resulted in 7% growth in points of presence year over year, which is flowing to the EBITDAaL profit line. New services revenue for indoor cells, which are used to boost wireless signals in indoor spaces, saw a big spike in growth, up 30% from last quarter. Management indicated that this division enjoys EBITDAaL margins above the group level. We maintain our EUR 12.60 fair value estimate and see 9% upside for the shares at this point. Although 9% upside might not seem too high, Inwit's share price has rarely offered big discounts to investors compared with our fair value estimate, given its high tenancy ratios (2.2 times at the end of this quarter), double-digit growth, and high EBITDAaL margins. Inwit offers a very good hedge against inflation, which remained high at 6.7% in Italy during June, according to European Union databases.

Narrow-moat Inwit continued its healthy pace of organic growth during first-quarter 2023, with revenue growing 12.8% thanks to new tenants and consumer price index-linked escalators, which resulted in EBITDA after leases growth of 18.9%, a 71% margin, and 360-basis-point expansion year over year. The tenancy ratio is now 2.19 times (2.05 one year ago), the highest among European tower companies. Italy is one of Europe’s healthiest tower markets due to high competition among mobile operators, which keep deploying radio equipment across the country. We maintain our EUR 12.60 fair value estimate, which we increased in March after management raised its guidance.

We are increasing Inwit’s fair value estimate by 18% to EUR 12.60 per share from EUR 10.70 after revising medium-term estimates upward. Management now expects 2026 revenue to be above EUR 1.2 billion compared with EUR 1.1 billion before, with a margin of 76% for EBITDA after leases, compared with 75% previously. The improvement is explained by higher expected 2023 inflation compared with management’s original business plan and health of the Italian tower market, where demand for co-location in Inwit’s towers continues to be strong. We are confident Inwit can achieve these targets as we had already highlighted management’s previous guidance was conservative and there was room for further upside. Inwit is a high-quality company with high tenancy ratios (2.16 times at the end of 2022 and expected to reach 2.6 times in 2026), best-in-class inflation protection, and high cash flow visibility with strong EBITDAaL margins (69% in 2022 and expected to reach 76% in 2026). Shares are up 5% at the time of the writing.

Inwit’s strategy is to remain a local tower player in Italy, growing organically as Telecom Italia and Vodafone deploy new equipment on existing towers and new built-to-suit (BTS) towers to cover white spots (areas with poor coverage). Telecom Italia and Vodafone have already committed to deploy more than 12,000 new tenancies from 2021 to 2026, approximately 8,000 on existing towers and almost 5,000 on new towers, which should result in tenants per tower (the tenancy ratio) getting above the 2.5 range, also aided by other tenants (Iliad and Wind Tre, and other nonmobile tenants like utility companies) also deploying new equipment in Inwit’s towers. We estimate Inwit will keep deploying new capital at double-digit internal rates of return through BTS towers, distributed-antenna-systems (DAS), and fiber-to-the-tower projects.

As expected, narrow-moat Inwit kept growing at a healthy organic pace during the third quarter. Revenue grew by 8.9% organically year over year, while EBITDA after leases grew by 10.8%, with margins expanding 100 basis points compared with last year. Tenancy ratios are at 2.12 times compared with 2.09 last quarter and 1.98 times one year ago. The company seems to be doing a good job managing its cost base, as ground lease costs per site keep declining due to land renegotiations and buyouts, which is offsetting any inflation indexation in the cost base. We maintain our EUR 10.70 fair value estimate for Inwit, and believe it is a solid play to get exposure to growing dividends (3.7% yield with 7% annual growth expected) and inflation protection.

Narrow-moat Inwit made a significant upgrade to mid- and long-term guidance during its second-quarter results. Inwit's previous business plan assumed inflation of 1.9% in 2022, which has now been increased to 6.5%. The 2023 inflation assumption remains at 1.9%, so there could be further upside to guidance if the current inflationary environment continues during the next year. We had already commented that Inwit is a clear beneficiary from the high inflationary environment, as its master service agreements are linked to the consumer price index with no caps and a 0% floor. Our forecasts were already above management’s previous guidance and are aligned with the new updated guidance, so we maintain our EUR 10.70 fair value estimate. In our view, Inwit is a good company for investors looking for strong downside protection during these uncertain times as it provides long-term cash flow visibility, upside from inflation, strong margins (68% EBITDA margins after leases in the quarter), and its infrastructure is critical. The updated guidance implies 2023 revenue and EBITDA (after leases) will be up to 4%-6% higher than the previous one.

Inwit’s strategy is to remain a local tower player in Italy, growing organically as Telecom Italia and Vodafone deploy new equipment on existing towers and new built-to-suit (BTS) towers to cover white spots (areas with poor coverage). Telecom Italia and Vodafone have already committed to deploy more than 12,000 new tenancies from 2021 to 2026, approximately 8,000 on existing towers and almost 5,000 on new towers, which should result in tenants per tower (the tenancy ratio) getting above the 2.5 range, also aided by other tenants (Iliad and Wind Tre, and other non-mobile tenants like utility companies) also deploying new equipment in Inwit’s towers. We estimate Inwit will keep deploying new capital at double-digit internal rates of return through BTS towers, distributed-antenna-systems (DAS), and fiber-to-the-tower projects.

We believe the current bear market offers an opportunity to buy shares in narrow-moat tower firms Cellnex and Inwit. Tower firms enjoy switching costs as they provide critical infrastructure to mobile operators. Their long-term contracts provide cash flow visibility. Tower firms benefit directly from inflation, as their contracts have consumer price index escalators that flow directly to the top line while operating expenses are less affected. Inwit estimates it will have incremental 1% growth in EBITDA (EUR 5 million) for every 1% increase in inflation. We also expect Cellnex to benefit from inflation, but to a lesser extent, given how its contracts are structured. Cellnex and Inwit provide 45% and 15% upside, respectively.

Narrow-moat Inwit's first-quarter results were in line with our and market expectations. Revenue grew organically by 9.1% as Telecom Italia and Vodafone deployed 620 new points-of-presence, or POPs, jointly, as they continued to expand their networks in Italy. Growth from other tenants was slower this quarter, at 230 new POPs (450 last quarter), but management expects an acceleration to 400 in the second quarter. All this resulted in EBITDA (after leases) growing by 12.4% with margins expanding by 200 basis points to 67.1%. Although we might fine-tune our forecasts, we don’t plan any material changes to our EUR 10.70 fair value estimate, which represents 6% upside compared with the current share price.

Inwit comfortably met its 2021 financial guidance, with revenue at the low end of the guided range but EBITDA (after leases) and free cash flow exceeding expectations. For 2022 management expects revenue growth to be slightly below 10% and EBITDA growth in the midteens, in line with our forecasts. Inwit’s tenancy ratio passed the 2.0 times mark for the first time at 2.01 times and we expect it to end the year with a tenancy ratio above 2.2 times. We believe this is a good time for investors to buy shares in a business that presents growing cash flows with high visibility, expanding EBITDA margins (66% after leases in 2021) and strong inflation protection. Inwit also announced 7.5% growth in its dividend to EUR 0.3225, so it might be interesting for investors looking for exposure to growing dividends. We maintain our EUR 10.70 fair value estimate, which currently implies 20% upside.

We are initiating on European wireless tower firms Inwit, Cellnex, and Vantage Towers with narrow moat and stable moat trend ratings and fair value estimates of EUR 10.70, EUR 52, and EUR 29, respectively, which represent a 12%, 29%, and 0% upside based on the Monday, Jan 31 closing price. Our narrow moat ratings are supported by switching costs, as many European mobile operators (MNOs) rely on tower firms to operate their businesses, having almost no network alternatives. Switching tower networks is usually not an option for carriers as this could cause coverage disruptions, resulting in reputational damage. Switching costs are strengthened by the all-or-nothing clauses included tower firms’ contracts, which means MNOs cannot cherry pick towers when contract renewal is due, having to choose the entire tower portfolio or none. Inwit is the only company that also enjoys efficient scale characteristics on top of switching costs, as it is solely focused in Italy, an efficient tower market with high tenancy ratios (number of tenants per tower).

Inwit’s strategy is to remain a local tower player in Italy, growing organically as Telecom Italia and Vodafone deploy new equipment on existing towers and new built-to-suit (BTS) towers to cover white spots (areas with poor coverage). Telecom Italia and Vodafone have already committed to deploy more than 12,000 new tenancies from 2021 to 2026, approximately 8,000 on existing towers and almost 5,000 on new towers, which should result in tenants per tower (the tenancy ratio) getting closer to the 2.5 range, also aided by other tenants (Iliad and Wind Tre, and other non-mobile tenants like utility companies) also deploying new equipment in Inwit’s towers. We estimate Inwit will keep deploying new capital at double-digit internal rates of return through BTS towers, distributed-antenna-systems (DAS), and fiber-to-the-tower projects.