Company update:
Telekomunikasi Indonesia (TLKM IJ, BUY, TP: IDR5,000)
Still a Good Conversation
Telekomunikasi Indonesia (TLKM IJ, BUY, TP: IDR5,000)
Still a Good Conversation
We continue to like
Telekomunikasi Indonesia (Telkom) and expect its revenue to grow by
12.6%/11.6%/11.5% YoY in FY16-18 respectively as:
1. It is well-positioned to capitalise on
robust growth in the mobile space;
2. Competition in the industry is healthy.
It remains a good
proxy to the tax amnesty programme given its sizeable weighting on the JCI and
boasts superior dividend yields vs peers. Reiterate BUY, with a higher TP of
IDR5,000 (from IDR4,000, 14% upside).
♦ Valuations are still
attractive when stacked against regional peers. Indonesian telcos
trade at an average of 8.1x FY16 EV/EBITDA, below the regional average multiple
of 9.5x. Telkom’s 7.8x EV/EBITDA FY16 remains
attractive due to:
i. Strong mobile revenue growth in the medium-to-long
term due to a more stable competition in the industry;
ii. Fixed broadband could be the next area of
growth for Telkom;
iii. Better control cost management – which leads
to wider EBITDA margins;
iv. It is an excellent proxy to foreign inflow
stemming from the tax amnesty programme;
v. Telkom has a superior FY16F ROE of 21.8%
compared to its peers.
♦ Stabilisation of data
yields in the medium term. In our view, data usage will continue to grow faster over
the next few years on the back of cheaper handsets, and useful/relevant mobile
apps. However, the improvement in the data’s demand is on the expense of data
yield – whereby data yield remains under pressure at IDR31.9/megabyte (MB) (-13%
QoQ; -18% YoY) in 2Q16 – a smaller YoY decline compared to last year. We expect
Telkom’s data yield to remain under pressure in the medium term, given the
strong competition in the data segment – although this will normalise in the
long run.
♦ A decent 1H16. 1H16 core profit of
IDR10trn beat our/consensus estimates, making up 58%/55% of full-year estimates
respectively. Mobile internet and data revenue growth remained strong, rising
46% YoY (1H16: +47% YoY).
♦ Meanhile, voice
revenue grew by 8% YoY on a higher revenue per minute (RPM) of IDR169 (+17%
QoQ). Data yield narrowed by 13% QoQ to IDR32/MB, reflecting the migration of
pay-per-use (PPU) to data bundled plans and 4G.
♦ Maintain BUY with a higher TP of
IDR5,000, assuming a WACC of 10.7% and TG of 1.5%. Our TP implies 7.8x/6.9x
FY16/FY17 EV/EBITDA. Telkom remains our Top Pick for Indonesian telcos, given
its strong growth prospects, higher ROEs and superior dividend yield
Best regards,
David Arie Hartono
Assistant Vice
President
Research Analyst – Media,
Transportation
PT. RHB Securities
Indonesia
