RHB Indonesia - Telekomunikasi Indonesia - Blazing The Trail (Telekomunikasi Indonesia, Ciputra Development) Unknown Kamis, 04 Mei 2017




Good morning,

Telekomunikasi Indonesia – Blazing The Trail
Telkom remains one of our top ASEAN-4 telco picks and our preferred Indonesian telco sector exposure. This is due to its strong brand loyalty and superior 3G/4G networks which allow it to stay ahead of the competition in a growing market. It continues to deliver double-digit growth in revenue, EBITDA and net profit while maintaining its above-industry growth guidance. Post its 1Q17 results call, we maintain our 2017F-2018F core earnings, BUY recommendation and DCF-derived TP of IDR5,000 (13% upside) which implies 7.6x FY17F EV/EBITDA.


¨ Balancing data revenue growth and yields. The most frequently-asked question during Telekomunikasi Indonesia’s (Telkom) results call was regarding its view on data monetisation. It also fielded queries on the decline of voice revenue, Indihome and the upcoming spectrum auction.
While Telkom has scaled back its 4G data bonuses since 1Q17, management agreed that it needed to repair data prices. However, it was not keen on an above-the-data-price increase, as it was wary of customer complaints as data traffic has surged 115.5% YoY and 11.8% QoQ. Its reaction was similar to that of Indosat (ISAT IJ, NEUTRAL, TP: IDR7,100) and XL Axiata (EXCL IJ, BUY, TP: IDR3,355). In our view, as long as data traffic continues to grow robustly, above-the-line price increases would be less likely – and vice versa.
Telkom’s data, Internet and IT services revenue surged 25.4% YoY and 23.4% QoQ in 1Q17. Its total customer base grew 10.3% YoY and its smartphone penetration increased to 49% from 42%.
¨ Telkom announced a 70% dividend payout ratio for FY16, compared with FY15’s 60%. It also guided for a similar payout ratio for FY17, if it manages to sustain its solid performance after a recording sturdy 1Q17 numbers. It kept its guidance on its EBITDA margin and capex for the year.
¨ Indihome targets to have 1.3-1.5m new subscribers (subs). Indihome Dual-Play (2P), which has gained traction since its launch in Dec 2016, contributed about 214,000 of Telkom’s 1.78m total of Indihome subs. Management shared that this offering has an ARPU of c.IDR320,000. Meanwhile, Indihome recorded a blended ARPU of IDR357,000 (4Q16: IDR341,000).
¨ Strong 1Q17 results. Revenue, EBITDA and earnings grew 12.6%/14.7%/45.8% YoY and 2.9%/11.2%/43.8% QoQ respectively. The stronger sequential earnings growth was attributable to seasonally lower marketing costs, a 8% QoQ drop in depreciation expense, lower financing costs and higher other income. Results were in line with our/consensus estimates.
¨ Maintain BUY. Our DCF-derived TP (WACC: 10.7%, TG: 1.5%) of IDR5,000 also implies 7.6x/6.5x FY17-18F EV/EBITDAs respectively. Telkom’s prospective EV/EBITDA valuations remain attractive vs its regional peers’ 8x-9x. Key de-rating catalysts include stronger-than expected competition and higher-than-expected capex. (Norman Choong, CFA. Jeffrey Tan)

Link to report: Telekomunikasi Indonesia : Blazing The Trail
Link to Daily report: Indonesia Morning Cuppa 040517



Results Review:

Ciputra Development (CTRA IJ, BUY, TP: IDR1,900), Expect Numbers To Improve In The Quarters Ahead

Ciputra’s 1Q17 results were mixed. Its revenue fell below estimates, accounting for 15%/16% of our/consensus full-year projections respectively. However, earnings exceeded our expectations, at 20% of our FY17F estimate. We expect its numbers to improve in the coming quarters as well, and maintain our assumptions for now. Maintain BUY, with a TP of IDR1,900 (56% upside) reflecting a 40% discount to RNAV.

¨ 1Q17 topline was below expectations. Ciputra Development (Ciputra) booked IDR1,271bn of revenue (-45.2% QoQ, -2.6% YoY), which was below our expectations and accounted for only 15% of our full-year estimate. The decline in total revenue was caused by a decrease in the revenue stemming from its development and investment projects dealing with residential units, hospitals and offices (Figure 2).
In the same quarter, it booked IDR1,218bn in marketing sales (+ 8% YoY), equivalent to 14% of its 2017 target. While it sold a smaller number of landed homes this quarter, total sales were also significantly made up by sales of its commercial properties, apartments, offices and land lots (Figure 6).
¨ Earnings were better than anticipated. To our surprise, net profit came in at IDR216bn (-43.5% QoQ, +50.5% YoY), which accounted for 20% of our estimate and was above its seasonal (1Q) average of 18% (Figure 5). The annual growth was supported by lower operating expenses, non-operating income, and a lower portion of minority interest.
As the support mostly came from items below operating profit in its books, these resulted in its net margin widening by 600 bps YoY to 17%, while its gross margin declined 262 bps YoY to 48%.
¨ Expect a better outlook. We believe Ciputra’s outlook should be more positive going forward following last year's catalysts, which are already in place. We expect presales to pick up in 2H17. As such we have projected 18% CAGR growth for revenue and 19% CAGR growth for net income for FY16-19F.
¨ Lower benchmark rate encourages mortgage users. We also note the slight shift in the proportion of payment methods during 1Q17. The percentage of buyers opting to use a mortgage to buy their properties ticked up a notch while the proportion of buyers preferring cash and in-house financing options dialed down slightly, compared to 1Q16. We believe this trend may continue and mortgages may be the preferred payment method in the future, if benchmark interest rates set by Bank Indonesia remain low.
¨ Still a BUY. As we are keeping our assumptions, we maintain our BUY call. Our unchanged TP of IDR1,900 is premised on a 40% discount to RNAV. Currently, the stock is trading at 16.4x FY17F P/E. (Yualdo Tirtakencana)

Link to report: Ciputra Development : Expect Numbers To Improve In The Quarters Ahead

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Best regards,

Helmy Kristanto
Director
Head of Indonesia Research
PT. RHB Securities Indonesia

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