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May 03, 2016 11:58:44
Telekomunikasi Indonesia (TLKM) Keeping the beat
 
More growth exposure from mobile and fixed data service
We increase Telkomsel’s 2016E revenue by 2% vs. old estimate, mainly on the back of higher data revenue by 3% (driven by traffic). Regarding fixed broadband, we expect Indihome to contribute 5-6% to TLKM’s revenue in 2016E-17E (vs. 1Q16 4%) assuming same ARPU level as 1Q16 at IDR326K. Currently, Indihome lowest packet price of IDR 405K (since Feb 2016; rose 16% from prev. IDR350K) is already similar to  LINK’s 1Q16 ARPU of IDR402K. Our 2016E revenue is 3% above our old estimate.
 Slight change in EBITDA
We revised up our 2016E-18E EBITDA by 3-5%, mainly due to higher revenue estimate and slight margin increase on the back of better 1Q16 EBITDA margin (no ERP) than our prev. estimate for 1Q16. Our 2016E ERP cost estimate is IDR500bn (possibly incurred in the remaining quarters this year). We also take into account that TLKM might expense est. IDR750bn final tax as expense in 2016 (already paid as cash but still booked in prepaid tax last year).
 
More capex to support data growth
We increase our 2016E-18E capex to sales assumption from 26-19% to  26-23% anticipating investment increase to support data growth. Our 2017E-18E capex is higher by 23/17% to old estimate.
 
Raise TP by 6% to Rp3,800 (10.1% ups.)  - Maintain Buy
Our DCF-based method assume WACC of 10.3%, slightly lower than previously 11.4% as: RFR down from 8.1% to 7.2%, Debt/capital ratio raised from 19% to 32% (FY15 total debt above our est.). We maintain terminal’s EV/EBITDA for Telkomsel at 9x, but slightly raise TLKM excl. Telkomsel from 6.0x to 6.5x on the back of transition progress from copper to more exposure in fiber optic business (if no re-rating, TP is IDR3.7K). TLKM trades at 8x 2016 EV/EBITDA, slightly below average regional telecoms’ excl. Indonesia 9x 2016E EV/EBITDA. Core 2016 PE of TLKM is 19x slight premium to regional telecoms excl. Indonesia at 18x. Our TP implies 9x 2016 EV/EBITDA and 21x 2016 PE. Our TP represents Telkomsel’s valuation at 10x and Telkom ex Telkomsel at 5x 2016E EV/EBITDA (below LINK’s current price valuation at 7x).

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