Telkom Indonesia(TLKM IJ)

Transcription

1 Equity Research Initiation Friday,07 September 2018 BUY Initiation Last price (IDR) 3,360 Target Price (IDR) 4,300 Upside/Downside +28.0% Previous Target Price (IDR) 4,300 Stock Statistics Sector Bloomberg Ticker Telco TLKM IJ No of Shrs (mn) 100,800 Mkt. Cap (IDRbn/USDmn) 338,688/22,741 Avg. daily T/O (IDRbn/USDmn) 416.9/28.0 Major shareholders (%) Indonesian Govt Bank of New York Mellon Corp. 5.5 Estimated free float 47.9 EPS Consensus (IDR) 2018F 2019F 2020F Danareksa Consensus Danareksa/Cons (4.4) (2.4) (2.9) TLKM relative to JCI Index Telkom Indonesia(TLKM IJ) EBITDA margin recovery by bps in 2H18 We initiate with BUY recommendation on Telkom as we expect the data services contribution to increase faster than expected and dominate in total revenues. This is catalyzed by the data price upward movements combined with superlative growth in data traffic. Concurrently, economies of scale and cost savings initiatives are expected to kick in with quarterly EBITDA margin to recover from historic low. The stock which offered payout ratio minimum 70% in recent times, its EV/EBITDA-19 currently trades at 5.9x below the 3yr average. Our DCF valuation starts from 2019 earnings and suggests a TP of Rp4,300 which implies forward EV/EBITDA of 7.0x. Rosy data outlook; data contribution to reach 65-70%. The upside in data services is significant as numbers show Telkomsel (TSEL) subscribers still use a lot of voice. Waiting this usage to be converted to data, we estimate the impact from service migration to last a couple of quarters until 65-70% of TSEL s topline is generated by data services, judging by XL Axiata recent transition experience. In TSEL s case it will be less challenging as 4G coverage has increased significantly due to robust 4G network rollout (added 38,000 BTS in 2yrs to reach 43,100) where propensity to consume data is higher than 2G and 3G. This is further catalyzed by concerted effort among operators to increase data prices to strongly support data yield recovery. Positive EBITDA impact from undervalued segments like Households and SMEs/enterprises/public segments. Telkom has planted as many as 19mn homepasses with 4.1mn subscribers / households registered (5.0mn target in FY18 revised up from 4.7mn) which translates to ~21% home-pass penetration closest rival First Media records ~29% penetration - which suggests Indihome adoption upside is large. Corporates and SMEs demand for digital and ICT solution is growing in pursuit for more efficient operations. Government also spends about Rp15 tn p.a. on IT to modernize the public sector. We have strong conviction that significant value will be unlocked when both segments reach critical mass and add to group EBITDA without much incremental OPEX and CAPEX. Expect EBITDA margin recovery by bps in 2H18. While the EBITDA margin fell significantly due to immense price competition during sim card re-registration (being a one time event), and due to saw sizable 2Q18 OPEX increases, we do not expect it to fall much further. We estimate EBITDA margin to be in high 40s as a) mobile data yields improve, b) there is momentum in Indihome EBITDA and c), there are economies of scale from investments in fiber and satellite infra to be unlocked by Corporates/SMEs as well as wholesale B2B business. Stronger 1H18. Initiate coverage with a BUY. We expect profitability to jump in 2H18. Source : Bloomberg After normalization of its EBITDA margin, the new norm should range in the 45-50% range for the group - still among the highest among ASEAN Telcos. Our DCF valuation derives a TP Rp4,300 (BETA of 0.8, WACC 10%) implying EV/EBITDA-19 of 7.0x. Key Financials Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (IDRbn) 116, , , , ,973 EBITDA (IDRbn) 59,498 64,609 63,826 70,503 76,314 EBITDA Growth (%) (1.2) Net profit (IDRbn) 19,352 22,145 20,783 23,624 25,900 EPS (IDR) x Niko Margaronis EPS growth (%) (6.2) (62-21) Ext BVPS (IDR) , ,122.0 niko.margaronis@danareksa.co.id DPS (IDR) PER (x) PBV (x) Dividend yield (%) EV/EBITDA (x) See important 5.8 disclosure 5.5 at the back 5.5 of this report Source : TLKM, Danareksa Estimates

2 Exhibit 1. Revenues and Growth Exhibit 2. Net Profits and Growth Exhibit 3. Margins Exhibit 4. Gearing Level See important disclosure at the back of this report 2

3 Exhibit 5. Telkom quarterly financial results Rp bn FY16 FY17 1H18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Operating Revenue 116, ,256 64,368 27,542 28,912 29,734 30,145 31,022 32,999 32,982 31,253 32,343 32,025 Total Operating Expense (77,138) (84,323) (46,268) (17,970) (18,597) (19,350) (21,221) (18,531) (21,704) (21,177) (22,911) (21,465) (24,803) Operation & Maintenance (31,263) (36,603) (21,883) (7,651) (8,523) (7,447) (7,642) (8,298) (10,110) (8,702) (9,493) (10,244) (11,639) Depreciation & Amortization (18,532) (20,446) (10,331) (4,405) (4,334) (4,618) (5,175) (4,773) (4,857) (5,051) (5,765) (5,373) (4,958) Personnel (13,612) (13,529) (7,035) (2,999) (3,406) (3,649) (3,558) (2,977) (3,738) (3,880) (2,934) (3,035) (4,000) Marketing (4,132) (5,268) (1,958) (752) (977) (887) (1,516) (985) (1,065) (1,352) (1,866) (870) (1,088) Others (9,599) (8,477) (5,061) (2,163) (1,357) (2,749) (3,330) (1,498) (1,934) (2,192) (2,853) (1,943) (3,118) Operating Profit 39,195 43,933 18,100 9,572 10,315 10,384 8,924 12,491 11,295 11,805 8,342 10,878 7,222 Operating margin (%) EBITDA 59,498 64,609 28,343 14,655 14,140 15,583 15,120 16,809 16,426 16,814 14,560 16,116 12,227 EBITDA margin (%) Total other income (expenses) (1,006) (1,274) (911) (256) (133) (265) (352) (167) (364) (419) (324) (346) (565) Net interest income (expenses) (1,094) (1,335) (940) (271) (144) (289) (390) (184) (382) (443) (326) (360) (580) Other income Pre-tax profit 38,189 42,659 17,189 9,316 10,182 10,119 8,572 12,324 10,931 11,386 8,018 10,532 6,657 Tax (9,017) (9,958) (4,382) (1,423) (3,412) (2,613) (1,569) (2,948) (2,812) (2,868) (1,330) (2,554) (1,828) Minority interest (9,820) (10,556) (4,109) (2,306) (2,431) (2,700) (2,383) (2,688) (2,703) (2,700) (2,465) (2,244) (1,865) Net profit 19,352 22,145 8,698 5,587 4,339 4,806 4,620 6,688 5,416 5,818 4,223 5,734 2,964 Net profit margin (%) Capex 29,200 33,200 14,100 5,700 13, ,300 6,100 10,600 3,600 12,900 6,100 8,000 Capex intensity (%) Exhibit 6. Telkom group revenue breakdown by service & segment Telkom Group Service Revenue breakdown (Rp bn) FY16 FY17 1H18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Operating Revenue 116, ,256 64,368 27,542 28,912 29,734 30,145 31,022 32,999 32,982 31,253 32,343 32,025 Legacy business 54,477 50,438 20,441 12,882 12,222 15,261 14,112 12,995 13,025 12,664 11,754 10,709 9,732 Voice 38,497 37,246 15,573 8,925 9,182 10,255 10,135 9,619 9,611 9,397 8,619 8,145 7,428 SMS 15,980 13,192 4,868 3,957 3,040 5,006 3,977 3,376 3,414 3,267 3,135 2,564 2,304 Data & Internet 42,991 55,343 32,742 10,301 12,337 9,888 10,465 12,917 14,202 15,332 12,892 15,921 16,821 Fixed Line Voice 7,542 6,665 3,118 1,945 1,935 1,828 1,834 1,866 1,791 1,769 1,239 1,546 1,572 Interconnection 4,151 5,175 2,363 1, ,159 1,113 1,270 1,395 1,050 1,460 1,173 1,190 Network & Other 7,172 10,635 5,704 1,332 1,621 1,598 2,621 1,974 2,586 2,167 3,908 2,994 2,710 Telkom Group Segment Revenue breakdown (Rp bn) FY16 FY17 1H18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Operating Revenue 116, ,256 64,368 27,542 28,912 29,734 30,145 31,022 32,999 32,982 31,253 32,343 32,025 Mobile 83,998 90,073 41,022 19,578 20,585 22,239 21,596 21,553 22,936 22,803 22,781 21,068 19,954 Consumer 10,410 11,105 6,415 2,399 2,452 2,782 2,777 2,730 2,582 2,801 2,992 3,104 3,311 Enterprise 15,816 19,130 12,317 4,053 4,356 2,931 4,476 5,055 5,253 5,512 3,310 8,636 3,681 Wholesale Int. Business (WIB) 5,866 7,439 4,348 1,209 1,647 1,618 1,392 1,693 1,879 1,727 2,140 2,239 2,109 Other / eliminations (128) 164 (96) (9) (2,704) 2,970 See important disclosure at the back of this report 3

4 Exhibit 7. Telkom group operational KPIs Telkom operational data Operational Data FY16 FY17 1H18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Cellular segment (mn) Cellular Subscribers Smartphone users Data users Data KPIs Data Traffic (Petabytes) 959 2,168 1, ,044 Average data usage (in gb) Data Yield Rp('000) Legacy KPIs MoU (Total / Bn Minutes) SMS (Total / Bn Units) ARPU Blended (Rp'000/month) Telecom. Network KPIs 4G BTS ('000) G BTS ('000) G BTS ('000) G/4G Total BTS Fixed broadband segment Fixed Broadband ('000) of which Indihome (mn) Indihome ARPU (Rp'000/month) Exhibit 8. Telkomsel condensed P&L Statement (Rp bn) FY16 FY17 1H18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Revenues 86,725 93,216 42,741 20,196 20,909 22,544 23,077 22,303 23,693 23,531 23,691 21,874 20,867 Legacy business 56,066 53,750 21,507 13,325 13,548 14,605 14,589 13,884 14,045 13,458 12,364 11,368 10,139 Digital business 30,659 39,466 21,234 6,871 7,361 7,939 8,488 8,419 9,648 10,073 11,327 10,506 10,728 Expenses (49,502) (53,164) (27,051) (11,675) (11,729) (12,404) (13,694) (12,292) (13,286) (13,216) (14,369) (13,446) (13,605) OPEX (36,695) (39,606) (20,503) (8,522) (8,743) (9,252) (10,427) (9,108) (9,701) (9,865) (10,950) (9,888) (10,615) D&A (12,807) (13,558) (6,689) (3,161) (3,051) (3,258) (3,337) (3,305) (3,337) (3,413) (3,503) (3,588) (3,101) Other - net (248) EBITDA 49,781 53,592 22,238 11,673 12,167 13,292 12,649 13,194 13,991 13,666 12,741 11,986 10,252 EBITDA margin (%) Net income 28,195 30,395 11,722 6,539 6,873 7,614 7,169 7,702 7,798 7,798 7,097 6,416 5,306 Net income margin (%) See important disclosure at the back of this report 4

5 07/15 09/15 11/15 01/16 03/16 05/16 07/16 09/16 11/16 01/17 03/17 05/17 07/17 09/17 11/17 01/18 03/18 05/18 07/18 09/18 Exhibit 9. Forward EV/EBITDA band chart 9.0x 8.0x TLKM forward EV/EBITDA band 7.0x 6.0x 5.0x 4.0x -2stdev -1stdev Average EV/EBITDA +1stdev +2stdev EV/EBITDA See important disclosure at the back of this report 5

6 Exhibit 10. Income Statement Year to 31 Dec (IDRbn) 2016A 2017A 2018F 2019F 2020F Revenue 116, , , , ,973 COGS (63,872) (70,723) (78,798) (84,689) (90,242) Gross profit 52,461 57,533 54,184 60,056 64,731 EBITDA 59,498 64,609 63,826 70,503 76,314 Oper. profit 39,195 43,933 41,469 46,249 49,931 Interest income 1,716 1,434 1,370 1,759 2,255 Interest expense (2,810) (2,769) (3,349) (3,686) (3,725) Forex Gain/(Loss) Income From Assoc. Co s Other Income (Expenses) Pre-tax profit 38,189 42,659 39,548 44,383 48,525 Income tax (9,017) (9,958) (9,887) (11,096) (12,131) Minority interest (9,820) (10,556) (8,878) (9,664) (10,493) Net profit 19,352 22,145 20,783 23,624 25,900 Core Net Profit 19,352 22,145 20,783 23,624 25,900 Exhibit 11. Balance Sheet Year to 31 Dec (IDRbn) 2016A 2017A 2018F 2019F 2020F Cash & cash equivalent 29,767 25,145 41,755 47,170 54,526 Receivables 7,363 9,222 8,551 9,308 9,966 Inventory Other Curr. Asset 8,516 10,390 9,886 10,761 11,521 Fixed assets - Net 114, , , , ,222 Other non-curr.asset 17,412 20,752 19,082 19,917 19,500 Total asset 179, , , , ,123 ST Debt 5,432 7,498 15,568 15,361 15,591 Payables 13,518 15,574 15,082 16,416 17,576 Other Curr. Liabilities 20,812 22,304 22,352 24,330 26,049 Long Term Debt 26,367 27,974 36,911 37,465 38,027 Other LT. Liabilities 7,938 13,004 10,471 11,738 11,104 Total Liabilities 74,067 86, , , ,347 Shareholder'sFunds 84,384 92,713 96, , ,100 Minority interests 21,160 19,417 21,637 24,053 26,676 Total Equity & Liabilities 179, , , , ,123 See important disclosure at the back of this report 6

7 Exhibit 12. Cash Flow Year to 31 Dec (IDRbn) 2016A 2017A 2018F 2019F 2020F Net income 19,352 22,145 20,783 23,624 25,900 Depreciation and Amort. 18,532 20,446 22,517 24,398 26,526 Change in Working Capital 5,222 (934) (507) 1,779 2,015 OtherOper. Cash Flow (12,810) (15,632) 1,979 1,926 1,470 Operating Cash Flow 30,296 26,025 44,772 51,727 55,912 Capex (15,426) (19,152) (27,926) (30,396) (30,995) Others Inv. Cash Flow (1,135) (1,906) 3, ,673 Investing Cash Flow (16,561) (21,058) (24,886) (29,472) (28,322) Net change in debt (2,039) 8,739 14,474 1, New Capital 1, Dividend payment (11,213) (13,546) (16,597) (15,587) (17,718) Other Fin. Cash Flow (829) (4,782) (1,154) (1,258) (1,108) Financing Cash Flow (12,085) (9,589) (3,276) (15,232) (18,667) Net Change in Cash 1,650 (4,622) 16,610 7,023 8,924 Cash - begin of the year 28,117 29,767 25,145 41,755 47,170 Cash - end of the year 29,767 25,145 41,755 47,170 54,526 Exhibit 13. Key Ratios Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Growth (%) Sales EBITDA (1.2) Operating profit (5.6) Net profit (6.2) Profitability (%) Gross margin EBITDA margin Operating margin Net margin ROAA ROAE Leverage Net Gearing (x) Interest Coverage (x) Source : TLKM, Danareksa Estimates See important disclosure at the back of this report 7