Telekomunikasi Indonesia – Connecting 250 Million People

TELKOM INDO40

PT Telekomunikasi Indonesia Tbk (TLKM.JK) is Indonesia’s largest telecommunication service provider and the third largest company by market capitalization in Indonesia. Telekomunikasi Indonesia (Telkom) was founded in 1856, which makes it also one of the oldest telecommunication companies in the world. Headquartered in the city of Bandung the company is listed since November 1995 on the IDX with ADRs traded in the US, Germany and in Switzerland. The Indonesian government owns 52.6% of the company with effects on voting and veto rights.

The company has a combined total of around 210.7m cellular phone, fixed line and broadband subscribers and provides furthermore a wide range of communication services, including multimedia, data and internet communication-related services, satellite transponder leasing, leased line, interconnection, cable television and VoIP services, as well as multimedia business such as contents and applications.

Through its 65% ownership in Telkomsel, Telkom is the largest cellular services provider in the country. With around 152.6m cellular subscribers Telkomsel has a market share of around 47%, followed by Indosat, Hutchison and XL Axiata with market shares of around 21%, 16% and 13% respectively.

Indonesia had a total of around 340m mobile cellular subscribers in 2015, an increase of 6.3% compared to a year ago. This high penetration of SIM cards of around 130% (population 256m) has reached levels of saturation. Indonesia’s telecommunication industry grew by 9%, almost double the GDP growth in 2015. Indonesia’s data service is still in a growth cycle and has a huge potential. Pushed by declining prices for smartphones and a growing youth segment, data traffic has grown by more than 100% last year. This trend is expected to continue, given the fact that the smartphone penetration (21%) and data consumption (800Mb/user/month) is still relatively low in Indonesia. Fixed broadband penetration in Indonesia is also low with only 6% of all households. This segment is expected to grow rapidly in the future, in line with a growing middle class in Indonesia.

Telkom’s data, internet and IT segment grew by 37.5% in 2015. Data services will continue to drive growth opportunities in the future. Large capital expenditure to increase capacity and coverage will give Telkom an advantage over its competitors with much lower levels of profitability.

With a staff of 24,420 and revenues of 102.5tn IDR Telkom generated a net profit of 15.5tn IDR in 2015, an increase of 7% compared to 2014. Both dividends and earnings per share grew by 26.94% and 6.51% respectively. For the first quarter ending March 2016 Telkom reports a growth of 16.6% in revenues and 20.3% in net profits. Despite strong competition, Telkom successfully maintains a favorable profitability level with EBITDA margin by 50.2% and net profit margin at 15.7%. 16 out of 23 covering analysts rate the company as outperform or buy. The company is currently priced at 22 times its earning, which is in line with the industry average. The stock is in an uptrend since mid-2011 with an increase of more than 170%. The company offers good perspectives for a longer term investment.

AIS Rating: ★★★★☆

 

 2011  2012  2013  2014  2015  2016E
 EPS (IDR)  112  134  147  148  158  186
 Change  -4%  20%  10%  0%  7%  18%
 P/E  P/E
Industry
 P/B  P/CF  Equity
Ratio
 ROE  Debt/
Capital
 Div
YLD
 23  22  4.6  8.8  57%  21.5%  43%  2.54%

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