Indosat Better and Profitable

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1 November 13, 215 Indosat Better and Profitable Paula Ruth Profitability turnaround We expect a turnaround in core profitability in 216, driven by higher EBITDA but lower D&A (smaller capex post-modernization), lower net interest expense (due to lower net debt), and also no more additional finance cost (premium to redeem USD 65mn bond in 3Q15E) compared to expected core loss in 215E. Our 216E core profit is still below consensus by -17%. For EBITDA, we assume EBITDA margin of 43/42% in 215E/16E. There could be further upside if ISAT can maintain its 3Q15 EBITDA margin at 46%. ISAT achieved positive core bottom line for two quarters in a row with 3Q15 core profit substantially jumped to Rp116bn (vs. 2Q15 Rp11bn), supported also by flat D&A and higher tax benefit rate that quarter. More manageable forex impact Last July, the company already called its USD 65mn bond (due 22) financed through USD revolving loan (USD 5mn) and IDR loan. USD debt portion to total debt (excluding obligation to finance lease) was ~33% in 9M15 (vs. 1H15 55%) of total debt. We think this put ISAT at no. 2 of lowest USD debt portion among Big 3 (Telkomsel ~11% in 9M15; EXCL ~5% in Oct 215). We still assume 215E USD debt portion at ~32%. We have not included possible 2nd tower sales in our forecast. Monetization of better network Not only ISAT is energized from positive industry momentums (rising data price and subscriber s large appetite for data service), the company is beginning to monetize more from its upgraded network (more 3G + 4G-ready BTS). Its 3G capability already reached ~49% of its network (total BTS) from only ~21% in 212 just before modernization started. Valuation: Buy with TP Rp5,4 Our DCF-based TP used 9.9% WACC, 1. Beta, and 3.x EV/EBITDA terminal value. Current price implied EV/EBITDA of x. We expect ROIC improvement momentum in E. If we assume the company sold 1K towers by the beginning of next year, ISAT would trade at 216E EV/EBITDA of 3.x (please see page 13 for assumption details). Companies Data PT Indosat Tbk is a telecommunication and information service provider in Indonesia that provides cellular services (prepaid and postpaid), fixed data services or MIDI (Multimedia, Internet & Data Communication) and fixed voice services including fixed wireless access services. BUY Company Update Share Price Sector Price Target Stock Data Rp5,4 Rp4,745 Telecommunications Rp5,4(14%) Reuters Code ISAT.JK Bloomberg Code ISAT.IJ Issued Shares 5,434 Mkt Cap. (Rpbn) 26,164 Avg. Value Daily 6 Month (Rpbn) Wk range 4855 / 35 Major Shareholders Qoredoo Asia Pte. Ltd. 65.% Others 19.7% Public 15.3% Consensus EBITDA 16F 17F Consensus (Rp bn) 11,896 12,55 TRIM vs Cons. (%) Year end Dec F 216F 217F 218F Sales 24,85 26,55 28,74 29,21 3,397 EBITDA 1,59 11,337 11,925 12,284 12,655 Net Profit (1,987) (1,59) 1,112 1,536 1,88 EPS (366) (293) Core Profit (542) (116) 1,6 1,43 1,774 Core EPS (Rp) (1) (21) Core EPS Growth (%) NM NM NM 42% 24% DPS (Rp) (183) (146) BVPS (Rp) 2,56 2,37 2,658 2,838 3,43 EV/EBITDA (x) Core P/E (x) NM NM Div Yield (%) NM NM 2.2% 3.% 3.6% Stock Data Stock Data Stock Price -. Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 PT Trimegah Securities Tbk - COMPANY FOCUS 1 6, 5, 4, 3, 2, 1, Avg. 5 Day MA Trading Value (RHS) Price (LHS) (Rpmn)

2 Healthier competitive rivalry among telco players Currently, there are ~5 telco operators in the industry, down from previously ~1 players in 29, implying that the industry has entered consolidation phase from previously unhealthy price war during Hence, we think there will be less price war in the industry supporting the industry player s effort to achieve better monetization of their network (more likely to increase ARPU). As smartphone adoption (~14% in 213) keep increasing, we think there is higher risk of substitution to data service rather than voice and SMS service. Hence, operators might tend to increase voice and SMS price to balance the decline in voice and SMS traffic. Figure 1. Porter s five competitive forces analysis Source: TRIM Research PT Trimegah Securities Tbk - SECTOR FOCUS 2

3 Figure 2. Timeline of Indonesia s telco industry s competitive phases Source: TRIM Research Figure 3. Current marketing positioning of GSM operators Telkomsel Indosat XL Three Postpaid brand (high end customers) Halo Matrix XL Tri Quality brand (medium to high end customers) Simpati Mentari XL Tri Fighting brand (low to medium end customers) As IM3 Axis Tri Source: TRIM Research PT Trimegah Securities Tbk - SECTOR FOCUS 3

4 Growing usage of data service from increasing smartphone penetration As mobile subscribers penetration rate in Indonesia already reached 125%, we think there won t be a significant increase in the total number of subscribers in the industry. However, we think there s still potential upside of further growth for the cellular business from the growing data usage on the back of growing smartphone adoption in Indonesia. This is also implied from 3G penetration rate in Indonesia which was still at 45%, significantly below the mobile subscribers penetration rate, considering that most of mobile subscribers in Indonesia still use feature phone (only 2G; voice and SMS). It is expected that smartphone penetration in Indonesia to reach 38% in 217E from 14% in 213. Figure 4. Mobile Subscribers Penetration in ASEAN, China, and India (213) Source: World Bank, ITU, TRIM Research Figure 5. A snapshot of mobile subscribes and usage in Indonesia Source: Internet live stats, Internet world stats, companies data, TRIM Research PT Trimegah Securities Tbk - SECTOR FOCUS 4

5 Figure 6. Indonesia s smartphone penetration Figure 7. Social network users in Indonesia(in millions) Source: Statista.com, TRIM Research Source: statista.com, World Bank, TRIM Research Figure 8. Number of Internet Users in Indonesia Figure 9. Average mobile app download rate per capita Source: Euromonitor, World Bank, TRIM Research Source: statista.com Spectrum allocation resource for competitiveness As 9Mhz already set as technology neutral, ISAT allocated its 1Mhz bandwidth on that band for 3G and 2G service through its network modernization project (finished last July). Although 18Mhz band should be ready for LTE after refarmed (scheduled to finish on November 215), higher usage of 4G service will depend also on the readiness of the ecosystem (4G smartphone penetration rate). We think there will be substantial increase in LTE penetration if the LTE mobile phone price goes down to Rp5K (~USD37) considering that telco operators do not subsidize handset (99% of subscribers using prepaid packages). There s already LTE mobile phone priced at Rp1.1mn (~USD81) based on price survey last May. Figure 1. Spectrum allocation Total 85 Mhz 9 Mhz 18 Mhz 21 Mhz 23 Mhz Telkomsel Indosat XL Axiata Hutchison Three Source: Indosat, Telkom, XL, and TRIM Research PT Trimegah Securities Tbk - SECTOR FOCUS 5

6 (Rp tr) Figure 11. Market share among Big 3 Telco Operators Cellular subscribers market share (Big 3) Telkomsel Indosat XL Revenue market share (Big 3) Telkomsel Indosat - cellular XL 8% 6% 4% 2% % 8% 6% 4% 2% % 8% 6% EBITDA market share (Big 3) Telkomsel Indosat - cellular XL ISAT hold 2nd biggest market share among Big 3 Telcos. In terms of 3Q15 EBITDA, ISAT s market share is ~16%, slightly higher than EXCL s ~14%. 4% 2% % During previous quarter, only Telkomsel (65% owned by TLKM) gained market share to ~71% of the three big telcos. Figure 12. Big 3 Telco Operators EBITDA EBITDA and EBITDA margin Telkomsel Indosat - cellular XL % 5% 4% 3% 2% 1% % PT Trimegah Securities Tbk - COMPANY FOCUS 6

7 Management s Strategy Network modernization to support higher quality data service Cellular revenue accounts for 81% of ISAT s revenue. Among its three services, voice is still the biggest contributor followed with data (35% and 31% to cellular revenue respectively). To catch the opportunity from strong data demand in Indonesia and increase network quality, the company already completed modernization (2G to 3G) on its network last July (started Nov/Dec 212): Phase 1 (done May 214) for key cities in Java, such as Greater Jakarta, Surabaya, and Bandung; Phase 2 (done October 214) for 14 cities outside Java; Phase 3 for satellite cities, such as Sidoarjo, Gresik, and Sragen. ISAT s 3G network already reached 23K BTS (~49% of ISAT s total BTS), more than EXCL s 3G of 18K BTS (~32% of EXCL s total BTS). Note that ISAT installed multichannel antenna spectrums (one antenna can support more than 1 spectrum compared to usually one antenna (BTS) for one spectrum) during the modernization. Following the completion of the modernization, data traffic already rose +167%YoY last quarter. Figure 13. ISAT s revenue breakdown Figure 14. Cellular revenue (9M15) Fixed data (MIDI) 15% VAS 4% Others 7% Fixed voice 4% Cellular - net revenue 81% SMS 23% Voice 35% Data 31% Figure 15. ISAT s 2G and 3G BTS Figure 16. 2G vs. 3G BTS composition 25, 1% 2, 8% 15, 6% 1, 4% 5, 2% M15 % M15 2G BTS 3G BTS 2G BTS 3G BTS Source: Company Source: Company PT Trimegah Securities Tbk - SECTOR FOCUS 7

8 (petabyte) (in TB) (Rp/MB) (bn) (SMS) (Rp/SMS) (bn minutes) (bn minutes) (Rp/minute) Figure 17. ISAT s voice traffic Figure 18. Voice effective price M14 9M Implied outgoing minutes (LHS) Implied outgoing minutes (LHS) Implied voice effective price (RHS) Figure 19. ISAT s SMS traffic Figure 2. SMS effective price M14 9M SMS traffic (bn) SMS traffic (LHS) SMS effective price (RHS) Figure 21. ISAT s data traffic Figure 22. Data effective price. 16, , 12, 1, 8, 6, 4, 2, 9M14 9M Data traffic Data traffic (LHS) Effective data price (RHS) PT Trimegah Securities Tbk - SECTOR FOCUS 8

9 Rp tr (mn) (Rp ) (mn) (Rp ) Data as the engine of growth On the back of growing smartphone penetration and industry s pursuit for more rational data price, we estimate ISAT s data revenue to grow 12%YoY (9M15 +67%YoY) for next year, but effective data price still down by - 19%YoY (9M15-35%YoY). We expect slower voice and SMS revenue going forward with faster decline in SMS due to more migration to messaging service. Our 215E/16E cellular revenue growth is 12/8%YoY, leading to total revenue growth of 1/6%YoY. 9M15 revenue accounts 74% of our 215E target (9M14 74% of FY). Please see next page for details about our forecasted operational drivers. Regarding 4Q15, the company mentioned it will accelerate some capex spending, including for LTE, to 4Q15 (still within capex guidance) from previously on 1Q16. Considering also the completion of network modernization last July, we assume lower capex portion to revenue next year relative to this year (9M15 capex:24% to revenue). Figure 23. ISAT s subscriber base and implied ARPU (YoY and QoQ) Number of subscribers (LHS) Implied ARPU (RHS) Number of subscribers (LHS) Implied ARPU (RHS) Figure 24. ISAT s Total Revenue E 216E 217E 218E Cellular - net revenue Fixed voice Fixed data (MIDI) PT Trimegah Securities Tbk - SECTOR FOCUS 9

10 Figure 25. Forecast drivers 31 December 213A 214A 215E 216E 217E 218E 219E Indosat Mobile subs (m) Subscriber market share 21.% 2.2% 21.8% 21.8% 21.8% 21.8% 21.9% Implied ARPU (Rp ) % change -2.2% -3.4% 3.4% 2.1% 3.% 3.2% 1.7% Voice Outgoing MOU (min/sub/month) Total MOU (min/sub/month) Total minutes carried % change -6.% -12.7% 4.2% 2.2% 4.% 4.% 3.% Incoming minutes (%) 29% 29% 3% 3% 3% 3% 3% Voice revenue / outgoing minute (Rp) % change 14.% 15.4% -2.% 2.1% 1.% 1.% 1.% Data Data traffic (terabyte) 3,517 85,359 23, , , , ,861 % change 1.8% 179.7% 138.1% 39.5% 14.% 1.% 8.% Data Rate (Rp/kb) NA NA % change NA NA NA -19.4% -5.% -3.% -1.% SMS Outgoing SMS (bn) % change 1.9% -13.5% 1.5% -1.9% -1.% -1.% -1.% Revenue / outgoing SMS (Rp) NA NA % change NA NA NA 6.9%.5%.5%.5% (in Rp tr) Cellular - net revenue % change 4.8%.5% 11.5% 7.8% 4.7% 4.7% 3.4% Fixed voice service % change 18.9% -9.8% -1.% -15.5% -1.% -1.% -1.% Fixed data (MIDI) % change 12.3% 7.4% 5.3% 1.4% 1.4% 1.4% 1.4% Net revenue % change 6.4% 1.% 1.% 5.9% 4.% 4.1% 3.1% EBITDA % change -1.6% -3.1% 12.7% 5.2% 3.% 3.% 2.% EBITDA margin 43.5% 41.8% 42.8% 42.5% 42.1% 41.6% 41.2% Capex / revenue 39.3% 29.2% 29.1% 26.3% 26.4% 26.4% 26.4% Source: Companies and TRIM Research PT Trimegah Securities Tbk - SECTOR FOCUS 1

11 (Rp tr) Cost efficiency supports EBITDA growth As ISAT plan to do rebranding around this month, near to 4G LTE momentum (1,8Mhz refarming schedule to finish by Nov), we expect possible increase in marketing and related expenses. For next year, the company said there s still possible further cost efficiency, e.g. from power expense. We expect 215E/16E EBITDA growth of 13/5%YoY (9M15 13%YoY) with both at ~43% margin. 9M15 EBITDA is 76% of our FY target (vs. 9M14 76% of FY). Figure 26. Opex excl. D&A composition 1% 8% 6% 4% 2% % 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Interconnection Radio frequency fee Personnel G&A Maintenance Marketing Utilities Leased circuit Others Figure 27. EBITDA and EBITDA margin E 216E 217E 218E 48% 47% 46% 45% 44% 43% 42% 41% 4% 39% 38% EBITDA EBITDA margin PT Trimegah Securities Tbk - SECTOR FOCUS 11

12 Further deleveraging plan ISAT said monetization of a section of its towers is considered likely next year to reduce debt. The company still exploring various options on how to best monetize it. Currently, ISAT has ~8.6K towers. Our forecast has not included the potential 2nd tower sale. Regarding ISAT s plan to release IDR bond Rp9bn (part of continues series bond), we already include the proceed of bond issuance in our 215E debt and remaining part of continues series bond (PUB) ~Rp3.5tr next year in 216E debt. We targets USD debt portion of 29% next year. Figure 28. Interest bearing debt breakdown as of 9M15 IDR Bank Loan 67% USD Loan (USD 56mn) 33% Source: Company Figure 29. Estimated potential proceed assuming tower section sold at 9x EV/EBITDA ISAT Weighted avg. shares outstanding (bn) 5 Last market price (Rp) 4,745 Market cap (Rp bn) 25,782 Assumption of potential number of towers sold in the beginning of 216E (towers) 1, Implied value / tower (Rp bn) 1.2 Potential cash received (Rp bn) 1,29 Implied towers' EV to EBITDA (x) 9. Assuming sales-and-lease back under operating lease PT Trimegah Securities Tbk - SECTOR FOCUS 12

13 Figure 3. Potential impact if 2nd tower sale-and-leased-back occur in early 216E (in Rp bn except stated otherwise) Before 2nd tower sale 216E After 2nd tower sale Diff. (%) ISAT's tower leasing business Estimated number of towers owned by ISAT (towers) 8,6 7,6 (1,) (11.6) Assumed number of towers sold 1, Revenue ISAT received from its towers' tenants Rp bn (83) (11.6) Assumed monthly rental Rp mn / month 1 1 Number of tenants BTS 5,925 5,925 ~Total tenancy ratio Implied third party tenancy ratio Implied Indosat's own tenancy in their towers Assumption: 216E tower lease revenue same as annualized 9M15 Revenue decline proportionate to number of owned towers EBITDA ISAT received from its towers' tenants (66) (11.6) Assumptions: EBITDA margin 8% 8% 8% Note: Tower companies' EBITDA margin: SUPR 83% TBIG 82% ISAT's tower rental expense to tower operator Additional tower rental expenses post sale NA 85 (85) NA - what ISAT pays to buyers Assumptions: Monthly rental / BTS (Rp mn) 1 ISAT's EBITDA 11,925 11,774 (151) (1.3) ISAT's Market cap, net debt, and Enterprise Value Market cap (current price) 25,782 25,782 Net debt 11,12 9,893 (1,29) (1.9) EV (current price) 36,885 35,676 (1,29) (3.3) ISAT's 216 Net Debt/EBITDA (x).9.8 ISAT's 216 EV/EBITDA (x) Source: Company, Bloomberg, TRIM Research PT Trimegah Securities Tbk - COMPANY FOCUS 13

14 Figure 31. DCF calculations YE Dec 31 (in Rp b) 217F 218F 219F 22F 221F 222F 223F 224F 225F 226F EBIT Tax Rate EBIT*(1-t) + D & A 3,734 3,654 3,433 3,186 3,176 4,137 4,252 4,78 4,379 4, % 25.% 25.% 25.% 25.% 25.% 25.% 25.% 25.% 25.% 2,81 2,74 2,575 2,39 2,382 3,13 3,189 3,59 3,284 3,139 8,55 9,1 9,478 9,983 1,219 9,514 9,666 1,136 9,732 1,183 - Capex (7,698) (8,17) (8,266) (8,52) (8,757) (8,972) (9,196) (9,395) (9,515) (9,689) + Decrease/(increase) in non cash working capital FCFF FCFF - Discounted 3,988 4,43 4,62 4,149 4,138 3,932 3,96 4,94 3,76 3,923 3,613 3,319 3,21 2,795 2,526 2,174 1,984 1,858 1,546 1,462 Value of cash-flows thro ,297 Terminal value- 3x EV/EBITDA 16,57 Risk-Free rate 8.4% Equity market risk premium 5.% Enterprise value 4,354 Beta 1. Net Debt / (Cash) 11,12 Cost of equity 13.4% # of shares 5,434 Post-tax cost of debt 8.25% Value per share (mn) 5,384 Debt/Capital ratio 59% WACC 1.4% Target price after rounding 5,4 Source: TRIM Research Figure 32. Forward historical EV/EBITDA - Big 3 Telcos Jul-1 May-1 Mar-1 Jan-1 Jul-11 May-11 Mar-11 Jan-11 Nov-1 Sep-1 Jul-12 May-12 Mar-12 Jan-12 Nov-11 Sep-11 Jul-13 May-13 Mar-13 Jan-13 Nov-12 Sep-12 Jul-14 May-14 Mar-14 Jan-14 Nov-13 Sep-13 Jul-15 May-15 Mar-15 Jan-15 Nov-14 Sep-14 Sep EXCL Fw-EV/EBITDA TLKM Fw-EV/EBITDA ISAT Fw-EV/EBITDA Source: Company, Bloomberg, TRIM Research PT Trimegah Securities Tbk - SECTOR FOCUS 14

15 Figure 33. ISAT s forward historical EV/EBITDA Oct-15 Jul-15 Apr-15 Jan-15 Oct-14 Jul-14 Apr-14 Jan-14 Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-1 Jul-1 Apr-1 Jan-1 ISAT Fw-EV/EBITDA ISAT Fw-EV/EBITDA avg Fw-EV/EBITDA + 1 STD Fw-EV/EBITDA - 1 STD Fw-EV/EBITDA - 2 STD Fw-EV/EBITDA + 2 STD Source: Company, Bloomberg, TRIM Research Valuation: Buy with 1% upside to TP Rp5,3 To arrive at our DCF-based TP, we assume 9.9% WACC, 1. Beta, and 3x EV/EBITDA for the terminal value. The terminal value s EV/EBITDA is still lower than EXCL (4x) despite ISAT s market share is slightly below EXCL among Big 3 Telcos. We note that ISAT trades at lower liquidity (ISAT s public s ownership ~15%) than EXCL. ISAT s terminal value EV/EBITDA is also significantly below Telkomsel (65% owned by TLKM) of 9x justified by Telkomsel s leadership in the industry. Current market price implied 3.1x 216E EV/EBITDA and 3.x 217E EV/EBITDA, still lower than EXCL (216/17E 6.2/6.x) although 3Q15 ISAT s market share is slightly higher than EXCL. We think there might be further upside to ISAT when: 1) It can sustain similar level of EBITDA margin to 3Q15 (after modernization) as we noticed that the company s EBITDA margin was 47% in FY12 (modernization start Nov/Dec 212). 2) The company can gain market share. 3) Management can manage its capex better. We currently assume capex at 26% to revenue for ISAT, higher than our assumption for EXCL s (15-22%) during 216E-26E. 4) The company can lower its USD forex risk faster. 5) Positive solution to IM2 case as it becomes part of the Indonesia s telco industry issue. We still forecast the IM2 loss estimate as provision in our long term forecast considering the Ministry s support and company s optimism. 6) Substantial time needed to achieve significant 4G penetration which support ISAT to gain market share in the growth of data service using 3G (3G handset still more affordable than 4G). Most of Indonesia s cellular subscribers still use 2G handset. In terms of PE, the company trades at 25.6x 216E PE and 18.x 217E PE, higher than TLKM (216E/17E PE for TLKM 14.7/13.5x). We still estimate a negative core bottom line for EXCL in 216 to recover to positive in 217 (217E PE of 634.5x). PT Trimegah Securities Tbk - COMPANY FOCUS 15

16 Risks Foreign exchange risk As telco operator is a capital intensive business and its capex, e.g. for network equipment, tends to be imported with payment to vendor using USD, the company used USD loan to help to finance its capex. Meanwhile, most of the company s revenue is in IDR. IDR weakness to USD could cause higher forex loss, interest expense, and lower profit, and also higher principal payment for the USD loan leading to higher risk of liquidity. IDR weakness to USD also cause increase in fund amount required to finance its capex and rise in operational cost. This might lead to lower network upgrade, expansion, less maintenance, and/or less purchase of items and services, which might cause the company provide service with quality not as high as before and lower its ability to compete. Competition Risk We think the telco industry in Indonesia is very competitive. If competitor lower its price substantially as its marketing strategy to grab market share for some times, it might cause the company losing its price-sensitive subscribers and follow to decrease its price as well to remain competitive. This could lead to price war causing the industry cannot monetize its investment properly nor growing its business in a sustainable way. Technology change risk As technology kept evolving, if the company cannot or too slow to invest in new technology which the industry already adopted, the company could lose its competitiveness, such as in form of declining ARPU. Interest rate risk The company is exposed to risk from interest rate changes for its interest bearing debt. If interest rate goes up, it cause higher interest expense and lower bottom line. PT Trimegah Securities Tbk - SECTOR FOCUS 16

17 Company Background ISAT is one of Indonesia s leading telecommunication and information service providers in Indonesia, established in It provides cellular, fixed data, and wireless broadband services, fixed telecommunication or fixed voice offerings, and digital services. Together with its subsidiaries, PT Indosat Mega Media (IM2) and PT Aplikanusa Lintasarta, Indosat provides fixed data or Multimedia, Internet & Data Communication services, as well as IT services to corporates. Figure 34. ISAT s group structure, share ownership, and subsidiaries Source: Company PT Trimegah Securities Tbk - SECTOR FOCUS 17

18 Income Statement (Rpbn) Year end Dec F 216F 217F 218F Revenue 24,85 26,55 28,74 29,21 3,397 Revenue Growth (%) 1% 1% 6% 4% 4% Gross Profit NA NA NA NA NA Opr. Profit 1,833 2,77 3,47 3,734 3,654 EBITDA 1,59 11,337 11,925 12,284 12,655 EBITDA Growth (%) -3% 13% 5% 3% 3% Net Int Inc/(Exp) (2,264) (2,684) (1,994) (1,692) (1,151) Gain/(loss) Forex (395) (2,329) Other Inc/(Exp) (1,11) Pre-tax Profit (1,936) (1,874) 1,616 2,184 2,644 Tax (44) (546) (661) Minority Int. (129) (133) (1) (12) (13) Extra. Items Reported Net Profit (1,987) (1,59) 1,112 1,536 1,88 Core Net Profit (542) (116) 1,6 1,43 1,774 Growth (%) -18% -79% -969% 42% 24% Dividend per share (183) (146) growth (%) -29% -2% -17% 38% 22% Dividend payout ratio 5% 5% 5% 5% 5% Balance Sheet (Rpbn) Year end Dec F 216F 217F 218F Cash and equivalents 3,48 8,422 9,46 3,58 3,644 Other curr asset 5,111 5,461 5,464 5,526 5,625 Net fixed asset 4,776 61,537 6,475 59,623 58,639 Other asset 3,93 4,49 4,912 4,748 4,996 Total asset 53,27 79,911 8,257 73,476 72,95 ST debt 11,797 5,86 8,95 2,454 2,769 Other curr liab 9,351 14,625 14,758 15,155 15,573 LT debt 11,35 16,863 12,413 9,959 7,19 Other LT Liab 6,474 29,214 29,636 29,471 29,72 Minority interest ,16 1,12 Total Liabilities 38,971 66,563 64,91 57,39 55,252 Shareholders Equity 13,618 12,534 14,441 15,421 16,533 Net debt / (cash) 19,666 14,31 11,12 8,833 6,315 Total cap employed 32,122 59,425 57,44 55,867 54,563 Net Working capital (12,557) (6,62) (7,982) (8,53) (9,73) Debt 23,146 22,723 2,58 12,413 9,959 Cash Flow (Rpbn) Year end Dec F 216F 217F 218F Core Profit (542) (116) 1,6 1,43 1,774 Depr / Amort 8,226 8,63 8,456 8,55 9,1 Chg in Working Cap 1,981 4, Others (2,316) (1,475) CF's from oprs 7,349 11,963 9,697 1,422 11,2 Capex (6,391) (7,725) (7,393) (7,698) (8,17) Others 1, CF's from investing (5,4) (7,592) (7,293) (7,597) (7,914) Net change in debt (1,8) (423) (2,215) (8,95) (2,454) Others (49) (556) (768) CF's from financing (1,57) 571 (1,42) (8,651) (3,222) Net cash flow 1,246 4, (5,826) 64 Cash at BoY 2,234 3,48 8,422 9,46 3,58 Cash at EoY 3,48 8,422 9,46 3,58 3,644 Free Cashflow 958 4,238 2,33 2,723 3,183 Key Ratio Analysis Year end Dec F 216F 217F 218F Profitability Gross Margin (%) NA NA NA NA NA Opr Margin (%) 7.6% 1.2% 12.4% 12.8% 12.% EBITDA Margin (%) 41.8% 42.8% 42.5% 42.1% 41.6% Core Net Margin (%) -2.3% -.4% 3.6% 4.9% 5.8% ROAE (%) -3.6% -.9% 7.5% 9.6% 11.1% ROAA (%) -1.% -.2% 1.3% 1.9% 2.4% Stability Current ratio (x) Net Debt to Equity (x) Net Debt to EBITDA (x) Interest Coverage (x) Efficiency A/P (days) NA NA NA NA NA A/R (days) Inventory (days) NA NA NA NA NA Interim Result (Rpbn) 3Q14 4Q14 1Q15 2Q15 3Q15 Sales 6,14 6,368 6,93 6,527 6,962 Gross Profit NA NA NA NA NA EBITDA 2,567 2,466 2,64 2,758 3,25 Opr. Profit ,128 Net profit (212) (657) (456) (278) (389) Core profit (56) (349) (64) Gross Margins (%) NA NA NA NA NA EBITDA Margins (%) 42% 39% 43% 42% 46% Opr Margins (%) 9% 4% 9% 1% 16% Net Margins (%) -3.5% -1.3% -7.5% -4.3% -5.6% Core Margins (%) -.9% -5.5% -1.1%.2% 1.7% Capital History Date 19-Oct-94 Rp. 7, PT Trimegah Securities Tbk - SECTOR FOCUS 18

19 PT Trimegah Securities Tbk Gedung Artha Graha 18 th Floor Jl. Jend. Sudirman Kav Jakarta 1219, Indonesia t f DISCLAIMER This report has been prepared by PT Trimegah Securities Tbk on behalf of itself and its affiliated companies and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to b uy. This report has been produced independently and the forecasts, opinions and expectations contained herein are entirely those of Trimegah Secu rities. While all reasonable care has been taken to ensure that information contained herein is not untrue or misleading at the time of publication, Trimegah Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided solely for the information of clients of Trimegah Securities who are expected to make their own investment decisions without reliance on this report. Neither Trimegah Securities nor any officer or employee of Trimegah Securities accept any liability whatsoeve r for any direct or consequential loss arising from any use of this report or its contents. Trimegah Securities and/or persons connected with it may have acted upon or used the information herein contained, or the research or analysis on which it is based, before publication. Trimegah Securities may in future participate in an offering of the company s equity securities.