Telekomunikasi Indonesia

(TLKM IJ)
1Q18 review: Weak but within expectations

Telecommunication Soft revenue print, as had largely been expected

For 1Q18, TLKM booked revenue of IDR32.3tr (+4% QoQ, +4% YoY), achieving 97%
Company Report of our first-quarter forecast and implying a 23% run rate against full-year estimates
May 3, 2018 (ours and consensus). Cellular revenue declined to IDR20.7tr (-8% QoQ, -6% YoY), as
legacy revenue fell to IDR10.7tr (-9% QoQ, -24% YoY) due to data migration.
Despite growing data consumption (2.6GB/sub per month; +16% QoQ, +82% YoY),
data revenue dropped on a QoQ basis to IDR10.0tr (-8% QoQ, +24% YoY), as data
(Maintain) Buy yield fell sharply (IDR11/MB; -24% QoQ, -50% YoY), affected by prepaid SIM card
registration and intensifying competition. Notably, total cellular subscribers fell to
Target Price (12M, IDR) 5,000 193mn (-2% QoQ, +14% YoY), reflecting the impact of registration. Increased
revenue from internet and IT services (IDR5.9tr; +187% QoQ, +56% YoY) helped
Share Price (5/2/18, IDR) 3,870 cushion the drop in cellular revenue.

Expected Return 29.2% EBITDA fell short of our estimate

EBITDA was IDR16.1tr (+11% QoQ, -4% YoY), achieving 92% of our forecast, with a
23% run rate against full-year estimates (ours and consensus), and translating to
EBITDA margin of 49.8% (4Q17: 46.6%, 1Q17: 54.2%). EBITDA fell short of our
Consensus OP (18F, IDRtr) 46.8
expectations mostly due to higher-than-expected operating expenses stemming
EPS Growth (18F, %) 9.9 from 1) higher operation and maintenance expenses (+25% YoY); 2) higher radio
EV/EBITDA (18F, x) 7.0 frequency usage charges (+35% YoY); 3) growing IT expenses (+63% YoY); and 4)
Industry EV/EBITDA (18F, x) 6.0 rising cost of handhelds sold (+48% YoY). Reflecting soft 1Q18 results, we fine-
Market Cap (IDRbn) 390,096.0 tuned our quarterly estimates, but are still confident our full-year EBITDA estimate
is achievable, as 2H18 should prove more favorable for TLKM.
Shares Outstanding (mn) 100,800.0
Free Float (mn) 49,192.9 Weak bottom line reflects soft top line
Institutional Ownership (%) 73.5
Meanwhile, net profit came in at IDR5.7tr (+36% QoQ, -14% YoY), achieving only
Beta (Adjusted, 24M) 1.0
89% of our first-quarter forecast, with a 23-24% run rate against full-year estimates
52-Week Low (IDR) 3,520 (ours and consensus). The bottom-line miss reflected soft top line.
52-Week High (IDR) 4,840
Conference call takeaways: Data yield to improve post-Eid al-Fitr
(%) 1M 6M 12M
Absolute 7.5 -4.0 -12.2 Management stated that the data yield deterioration seen in 1Q18 reflects TLKM’s
Relative 9.9 -4.1 -18.2 attempt to retain market share through pricing realignment between starter and
reload packages. It expects competition to stay intense through 2Q18, but added
(D-1yr=100)
JCI TLKM that data yield should start to improve post-Eid al-Fitr holiday, in line with our view.
The company reiterated its intention to maintain premium pricing in the long run.
130

110
Maintain Buy with TP of IDR5,000
90

70 1Q18 proved to be challenging for the incumbent. However, the relatively weak
results are largely within our expectations. TLKM remains our preferred pick, as we
5/17 7/17 9/17 11/17 1/18 3/18 5/18

expect the competition landscape to turn favorable for the incumbent in 2H18.

PT. Mirae Asset Sekuritas Indonesia FY (Dec.) 12/14 12/15 12/16 12/17 12/18F 12/19F
Revenue (IDRbn) 89,696 102,470 116,333 128,256 138,521 150,119
Infrastructure EBITDA (IDRbn) 45,673 51,415 59,498 64,609 69,619 75,463
Giovanni Dustin Net Profit (IDRbn) 14,471 15,489 19,352 22,145 24,334 27,138
+62-21-515-1140 (ext: 267) EPS (IDR) 146.1 156.4 195.4 223.5 245.6 273.9
giovanni@miraeasset.co.id BPS (IDR) 868.1 943.1 1,065.4 1,131.9 1,257.6 1,398.5
P/E (x) 28.8 26.9 21.5 18.8 17.1 15.3
P/B (x) 4.8 4.5 3.9 3.7 3.3 3.0
EV/EBITDA (x) 10.7 9.5 8.2 7.6 7.0 6.5
ROE (%) 17.8 17.3 19.5 20.3 20.6 20.6
ROA (%) 10.7 10.1 11.2 11.7 11.8 11.9
Dividend Yield (%) 2.4 2.1 2.7 2.8 3.5 3.9
Net debt-to-equity (x) 0.0 0.0 0.0 0.1 0.1 0.0
Source: Company data, Mirae Asset Sekuritas Indonesia Research estimates
Note: NP refers to net profit attributable to controlling interests
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
May 3, 2018 Telekomunikasi Indonesia

Table 1. TLKM’s 1Q18 earnings (IDRbn, %)

(IDRbn) 1Q17 4Q17 1Q18 QoQ (%) YoY (%) 1Q18/Mirae (%) 1Q18/Cons (%) FY18/Mirae (%) FY18/Cons (%)
Revenue 31,022 31,253 32,343 3.5 4.3 97.2 99.3 23.3 23.4
SG&A Expenses -14,213 -16,693 -16,227 -2.8 14.2
EBIT 12,036 8,795 10,743 22.1 -10.7
EBITDA 16,809 14,560 16,116 10.7 -4.1 92.2 N/A 23.0 23.3
Net Interest Income (Exp.) -184 -326 -360 10.4 95.7
Forex Gain (Loss) -50 117 -5 -104.3 -90.0
Others 522 -568 154 -127.1 -70.5
Pretax Profit 12,324 8,018 10,532 31.4 -14.5
Net Profit 6,688 4,223 5,734 35.8 -14.3 89.4 N/A 23.2 24.0
EBIT Margin (%) 38.8 28.1 33.2
EBITDA Margin (%) 54.2 46.6 49.8
Net Margin (%) 21.6 13.5 17.7
Source: Company data, Mirae Asset Sekuritas Indonesia Research

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May 3, 2018 Telekomunikasi Indonesia

APPENDIX 1

Important Disclosures & Disclaimers

Disclosures
As of the publication date, PT. Mirae Asset Sekuritas Indonesia, and/or its affiliates do not have any special interest with the subject company and
do not own 1% or more of the subject company's shares outstanding.

Stock Ratings Industry Ratings

Buy Relative performance of 20% or greater Overweight Fundamentals are favorable or improving
Trading Buy Relative performance of 10% or greater, but with volatility Neutral Fundamentals are steady without any material changes
Hold Relative performance of -10% and 10% Underweight Fundamentals are unfavorable or worsening
Sell Relative performance of -10%
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Mirae Asset Sekuritas Indonesia, we may call a trading opportunity in case there is a technical or
short-term material development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s
estimate of future earnings.
The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and
economic conditions.

Analyst Certification
Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily
responsible for this report. PT. Mirae Asset Seukritas Indonesia (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their
households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or
advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any
other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of
the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report
but, like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes
revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the
time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or
Mirae Asset Daewoo except as otherwise stated herein.

Disclaimers
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Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such
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