We reiterate TLKM amongst Top-Picks in Indonesia Telecom Sector. @Rp3,015, TLKM is trading on 15.6x 2016F PER on the back EPS Growth +12%, 5.5x 2016F EV/EBITDA, 3.8% 2016F Dividend Yield, and implies 11% Upside to DCF Rp3,350, we reiterate TLKM Outperform.
Telkomsel continues to reap the benefits of cellular industry consolidation, and we expect data package price points to continue to grind higher. As a result, we have revised up our revenue forecast for Telkomsel for FY16 by 1.0%; we now project 10.0% service revenue growth in FY16 (and representing a fifth consecutive year of double-digit service revenue growth).
While Telkomsel’s EBITDA margin is likely to fall 1.0 pp YoY into FY16, largely due to declining interconnect rates, we have revised up our FY16 EBITDA and net profit forecasts for Telkomsel by 1.1% and 1.5% given higher revenue and strong cost control.
Importantly, fixed line should be less of a drag on the strong cellular profit growth in FY16; we do not expect a recurrence of 9M15’s Rp945 bn provision for doubtful accounts receivable.
We have therefore revised up our FY16 consolidated earnings by 1.3%, and we forecast 12.3% YoY growth in headline net profit (7.1% ahead of consensus). Our DCF-based target price has been revised up 3.1% from Rp3,250 to Rp3,350. OUTPERFORM