BNP - Indonesia Telecoms 2011

SECTOR REPORT
EQUITIES RESEARCH
BNPP RECOMMENDATIONS
BBG
Code
Company
INDONESIA
INDONESIA TELECOMS
Indosat
Telkom Indonesia
XL Axiata
Rating
ISAT IJ
TLKM IJ
EXCL IJ
Share
Price
Target
Price
BUY 4,850.00 5,650.00

BUY 7,150.00 8,400.00
BUY 5,150.00 6,600.00
Upside /
Downside
+16%
+17%
+28%
NEUTRAL
INDUSTRY OUTLOOK
Short-term
term VAS hiccup
SUMMARY
BRTI orders temporary stop to premium-rate
rate SMS service
Indonesian operators have agreed to temporarily stop all premium-rate
premium
SMS subscription services (i.e, ringback tones, news, content,
content etc)
effective yesterday. The
he directive from the Indonesian Telecommunication
Telecommun
Regulatory Body (BRTI) came after a recent public outcry over unintended
subscriptions that deducted credit from users with prepaid accounts.
TOP STOCK PICK

BBG Code
Share Price
5,150
Target Price
6,600
1 Year - high
6,800
1 year - low
4,525
Oct-10
OUTLOOK
4Q11-1Q12
1Q12 revenue may be negatively impacted
This could hurt telcos 4Q11-1Q12 revenue. At present, value-added
services (VAS) form about 7% of mobile revenue. The
T extent of the impact
would depend on how quickly the service is resumed and the percentage
of subscribers that renew their subscription. Telcos may also have to
refund credit deducted previously.
VALUATION
Impact on longer-term
term earnings unlikely to be significant
We currently have BUYs on Telkom Indonesia (TP: IDR8,400), XL Axiata
(TP: IDR6,250) and Indosat (TP: IDR5,650). While the
th latest development
may have a negative short-term impact on revenue and earnings of
Indonesian operators, we remain positive as the impact on mediummedium to
longer-term earnings should be insignifcant. The competition has been
stable since easing in March/April 2011, while valuations
valuation of Indonesian
operators are cheap by regional standards. Telkom trades at 2012E
2012
EV/EBITDA of 4.3x, Indosat at 4.6x and XL at 5.1x,, compared to the Asian
average of 6.0xx based on BNPP and Bloomberg consensus estimates.
estimates
XL Axiata
EXCL IJ
Company
Jan-11
Apr-11
Jul-11
6,694
6,194
5,694
5,194
4,694
4,194
(IDR)
Oct-11
26
21
16
11
6
1
(4)
(9)
(14)
(19)
7,194
XL Axiata
Rel to MSCI Indonesia
(%)
VALUATION SUMMARY
Company
P/E
Yld (%)
FY1
FY2
FY2
Indosat
32.6
25.4
2.0
Telkom Indonesia
12.0
11.4
5.3
XL Axiata
14.2
13.4
3.7
Foong Choong Chen

choongchen.foong@asia.bnpparibas.com
+603 2179 6238
BNP Paribas Securities Asia research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index.
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PREPARED BY BNP PARIBAS SECURITIES ASIA

IMPORTANT DISCLOSURES CAN BE FOUND IN THE DISCLOSURES APPEND
NDIX
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19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
Premium-rate SMS services temporarily stopped

News
Indonesian operators have agreed to temporarily stop all premium-rate SMS subscription services (i.e.
ringback tones, news, content etc) effective today. This is in line with the directive from the BRTI, following
a recent public outcry over unintended subscriptions that deducted credit from users with prepaid
accounts. The BRTI has ordered telco operators to refund the deducted phone credits. Discussions between
the BRTI and operators on this matter will start today until 31 December 2011.
Comment
Operators say they will notify the relevant subscribers of the service cessation via SMS. Once the BRTI gives
the green light to resume service, operators will prompt subscribers to opt-in.
Operators may see a dip in VAS revenues in 4Q11-1Q12, due to service cessation and potential revenue
reversal from credit refunds. At present, VAS forms about 7% of Indonesian operators revenues. Therefore,
we believe the extent of the impact will depend on: 1) how quickly the BRTI is able to sort out the issue with
operators, 2) the percentage of subscribers that renew their subscriptions once the service resumes, and 3)
how much (if any) operators need to refund to subscribers for the deducted credits.
We currently have BUY ratings on Telkom Indonesia (TP: IDR8,400), XL Axiata (TP: IDR6,250) and Indosat
(TP: IDR5,650). While the latest development may have a negative short-term impact on revenue and
earnings of the Indonesian operators, we remain positive as we believe the impact on medium- to longerterm earnings is unlikely to be substantial. The competition remains stable since easing in March/April
2011, and valuations for Indonesian operators are cheap by regional standards. Telkom trades at 2012E
EV/EBITDA of 4.3x, Indosat at 4.6x and XL at 5.1x, compared to the Asian average of 6.0x based on BNPP.
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
Financial statements
Indosat
Profit and Loss (IDRb)Year Ending Dec
2009A
2010A
2011E
2012E
2013E
Revenue
18,824
19,797
20,743
22,070
23,575
Cost of sales ex depreciation
Gross profit ex depreciation
18,824
19,797
20,743
22,070
23,575
(9,638)
(10,171)
(10,817)
(11,587)
(12,242)
9,186
9,626
9,926
10,483
11,333
(5,561)
(6,152)
(6,512)
(6,861)
(6,928)
(235)
(226)
Other operating income

Operating costs
Operating EBITDA
Depreciation
Goodwill amortisation
Operating EBIT
Net financing costs
Associates
3,390
3,248
3,414
3,622
4,405
(1,734)
(2,128)
(2,085)
(2,025)
(1,896)
(150)
(112)
(112)
(112)
(112)
727
74
(566)
Profit before tax
2,232
1,082
651
1,486
2,397
Tax
(677)
(358)
(163)
(371)
(599)
Profit after tax
1,555
723
489
1,114
1,798
Recurring non operating income

Non recurring items
Minority interests
(56)
(77)
(77)
(77)
(77)
Preferred dividends
Other items
1,498
647
412
1,037
1,721
Reported net profit

Non recurring items & goodwill (net)
(273)
174
396
Recurring net profit
1,225
821
808
1,037
1,721
Recurring EPS *
225
151
149
191
317
Reported EPS
276
119
75.78
191
317
DPS
138
59.50
37.89
95.46
158
6.8
Driven by strong growth in

mobile data, less intense
market competition and
lesser drag from Fixed
Data business
Depreciation-to-sales ratio
is high at 31%
Per share (IDR)
Growth
Revenue (%)
0.9
5.2
4.8
6.4
(1.1)
4.8
3.1
5.6
8.1
Operating EBIT (%)
(24.8)
(4.2)
5.1
6.1
21.6
Recurring EPS (%)
(48.4)
(33.0)
(1.6)
28.4
65.9
Reported EPS (%)
(20.2)
(56.8)
(36.3)
152.0
65.9
Operating EBITDA (%)
Operating performance
Gross margin inc depreciation (%)
Operating EBITDA margin (%)
48.8
48.6
47.9
47.5
48.1
Operating EBIT margin (%)
18.0
16.4
16.5
16.4
18.7
6.5
4.1
3.9
4.7
7.3
Net margin (%)

Effective tax rate (%)
30.3
33.1
25.0
25.0
25.0
Dividend payout on recurring profit (%)
61.2
39.4
25.5
50.0
50.0
2.0
1.6
1.6
1.7
2.3
32.1
32.3
32.3
32.3
32.3
Interest cover (x)

Inventory days
Debtor days
Creditor days
7.0
6.5
6.4
6.8
8.4
(2.4)
(3.0)
(3.2)
(2.7)
(1.1)
6.1
5.8
5.7
6.1
7.6
(3.2)
(3.7)
(3.8)
(3.4)
(2.0)
ROE (%)
6.9
4.6
4.5
5.7
9.1
ROA (%)
4.7
4.6
4.6
5.0
6.1
Revenue By Division (IDRb)
2009A
2010A
2011E
2012E
2013E
Cellular
Operating ROIC (%)

Operating ROIC - WACC (%)
ROIC (%)
ROIC - WACC (%)
Higher due to lower staff

and operation &
maintenance cost
*Pre exceptional, pre-goodwill and fully diluted
14,300
16,027
17,265
18,796
20,418
MIDI
2,721
2,476
2,340
2,274
2,237
Fixed Telco
1,803
1,293
1,137
1,001
920
Sources: Indosat; BNP Paribas estimates
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
Indosat
Cash Flow (IDRb)Year Ending Dec
2009A
2010A
2011E
2012E
2013E
1,225
821
808
1,037
1,721
Depreciation
5,561
6,152
6,512
6,861
6,928
56
77
77
77
77
(1,151)
690
(107)
(706)
256
Associates & minorities

Other non-cash items
Recurring cash flow
5,692
7,739
7,290
7,269
8,982
(1,641)
(901)
(362)
67
(894)
Capex - new investment
(10,685)
(6,495)
(6,300)
(6,000)
(6,000)
Free cash flow to equity
(6,633)
344
628
1,336
2,087
Change in working capital

Capex - maintenance
Net acquisitions & disposals

Dividends paid
Non recurring cash flows
Net cash flow
Equity finance
Debt finance
Movement in cash
12
517
(40)
(40)
(40)
(949)
(771)
(345)
(227)
(540)
(7,568)
98
243
1,069
1,507
4,673
(859)
391
(1,695)
(1,534)
(2,895)
(761)
634
(625)
(27)
1,653
Management capex
guidance is IDR5.8t-6.5t.
Per share (IDR)

Recurring cash flow per share
FCF to equity per share
Balance Sheet (IDRb)Year Ending Dec
Working capital assets
1,047
1,424
1,342
1,338
(1,221)
63.26
116
246
384
2009A
2010A
2011E
2012E
2013E
4,304
4,084
4,377
4,574
5,727
Working capital liabilities
(8,787)
(7,667)
(7,598)
(7,862)
(8,120)
Net working capital
(4,484)
(3,583)
(3,221)
(3,288)
(2,394)
Tangible fixed assets
44,576
43,682
43,471
42,610
41,682
Operating invested capital
40,093
40,099
40,250
39,322
39,288
1,580
1,374
1,414
1,454
1,494
67
46
46
46
46
Goodwill
Other intangible assets
Investments
Other assets
1,679
1,557
1,624
1,694
1,768
Invested capital
43,418
43,076
43,334
42,516
42,596
Cash & equivalents
(2,057)
(2,836)
(2,075)
(2,710)
(2,084)
Short term debt
4,281
4,280
4,280
4,280
4,280
Long term debt *
21,193
19,775
20,166
18,472
16,937
Net debt
22,638
21,980
21,737
20,668
19,161
1,535
1,772
1,772
1,772
1,772
956
1,088
1,305
961
1,611
17,958
17,851
18,057
18,575
19,436
331
386
463
540
616
43,418
43,076
43,334
42,516
42,596
Deferred tax
Other liabilities
Total equity
Minority interests
Invested capital
* includes convertibles and preferred stock which is being treated as debt
Per share (IDR)

Book value per share
3,305
3,285
3,323
3,418
3,577
Tangible book value per share
3,014
3,032
3,063
3,151
3,302
123.8
120.5
117.4
108.1
95.6
41.1
41.6
40.5
39.4
36.3
Current ratio (x)
0.5
0.5
0.6
0.5
0.6
CF interest cover (x)
3.3
4.2
4.3
4.6
5.3
2013E
Financial strength
Net debt/equity (%)
Net debt/total assets (%)
Valuation
2009A
2010A
2011E
2012E
Recurring P/E (x) *
21.5
32.1
32.6
25.4
15.3
Recurring P/E @ target price (x) *
25.1
37.4
38.0
29.6
17.8
Reported P/E (x)
15.3
17.6
40.8
64.0
25.4
Dividend yield (%)
2.8
1.2
0.8
2.0
3.3
P/CF (x)
4.6
3.4
3.6
3.6
2.9
(4.0)
76.7
42.0
19.7
12.6
Price/book (x)
1.5
1.5
1.5
1.4
1.4
Price/tangible book (x)
1.6
1.6
1.6
1.5
1.5
EV/EBITDA (x) **
5.1
5.2
5.0
4.6
4.2
P/FCF (x)
EV/EBITDA @ target price (x) **
5.6
5.6
5.4
5.1
4.6
EV/invested capital (x)
1.1
1.1
1.1
1.1
1.1
* Pre exceptional, pre-goodwill and fully diluted
Net gearing to decline as

positive FCF accelerates
Based on a 50% ratio

payout
** EBITDA includes associate income and recurring non-operating income
Sources: Indosat; BNP Paribas estimates
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
Telkom Indonesia
2009A
2010A
2011E
2012E
2013E
Revenue
67,678
68,629
70,546
73,323
77,535
67,678
68,629
70,546
73,323
77,535
(30,915)
(31,527)
(34,065)
(35,076)
(36,435)
36,762
37,102
36,480
38,247
41,100
(13,975)
(14,611)
(13,987)
(14,426)
(14,750)

Operating costs
Operating EBITDA
Depreciation
Operating EBIT
22,788
22,491
22,493
23,821
26,350
Net financing costs
(1,634)
(1,507)
(1,404)
(1,288)
(999)
Associates
(30)
(14)
(14)
(14)
(14)
350
403
403
403
403
Non recurring items
973
43
Profit before tax
22,447
21,416
21,478
22,922
25,740
Tax
(6,404)
(5,546)
(5,369)
(5,730)
(6,435)
Profit after tax
16,043
15,870
16,108
17,191
19,305
Minority interests
(4,644)
(4,333)
(4,432)
(4,807)
(5,469)
Preferred dividends
Other items
11,399
11,537
11,676
12,385
13,836
Reported net profit

(701)
(32)
10,698
11,505
11,676
12,385
13,836
Recurring EPS *
544
585
594
630
703
Reported EPS
580
587
594
630
703
DPS
288
323
326
378
422
Revenue (%)
5.5
1.4
2.8
3.9
5.7
5.7
0.9
(1.7)
4.8
7.5
Operating EBIT (%)
1.6
(1.3)
0.0
5.9
10.6
Recurring EPS (%)
(9.0)
7.5
1.5
6.1
11.7
Reported EPS (%)
7.2
1.2
1.2
6.1
11.7
Faster growth due to higher

mobile data growth and
less intense market
competition
Per share (IDR)
Growth
54.3
54.1
51.7
52.2
53.0
33.7
32.8
31.9
32.5
34.0
Net margin (%)
15.8
16.8
16.6
16.9
17.8
25.0
28.5
25.9
25.0
25.0
53.0
55.2
55.0
60.0
60.0
Interest cover (x)
14.1
15.2
16.3
18.8
26.8
Inventory days
Debtor days
Creditor days
20.3
22.2
22.8
22.8
22.8
Operating ROIC (%)
26.2
24.6
23.6
24.4
26.6
13.6
11.9
10.9
11.7
13.9
ROIC (%)
24.5
23.3
22.3
23.1
25.1
ROIC - WACC (%)
11.9
10.6
9.6
10.4
12.4
ROE (%)
29.2
27.6
25.4
25.5
26.4
ROA (%)
17.5
17.2
17.0
17.6
19.1
2009A
2010A
2011E
2012E
2013E
Fixed Lines (incld Flexi SMS)
14,823
13,373
11,993
11,308
10,807
Cellular
44,443
45,567
47,834
50,361
54,028
Interconnection
1,339
1,077
862
862
862
Network
Data, Internet & IT (less Flexi SMS + Telkomsel
data revenues)
Rev sharing arrangements
1,218
1,058
1,212
1,349
1,464
4,592
5,593
6,586
7,282
8,105
Other telco servs
1,263
1,961
2,059
2,162
2,270
KSO (Joint Operation Schemes)
Improvement due to less

intense price pressure in
the mobile market and cost
reduction in the fixed-line
business
Higher due to IDR5t share

buyback and improvement
in payout ratio.
Sources: Telkom Indonesia; BNP Paribas estimates
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
Telkom Indonesia
2009A
2010A
2011E
2012E
2013E
10,698
11,505
11,676
12,385
13,836
Depreciation
13,975
14,611
13,987
14,426
14,750
4,674
4,347
4,445
4,820
5,483
2,372
2,807
(1,061)
929
(850)
31,719
33,270
29,048
32,560
33,219
Recurring cash flow

Capex - maintenance
(1,907)
(5,511)
(342)
(2,332)
(553)
(20,479)
(14,952)
(14,000)
(14,000)
(13,500)
0
19,166
9,332
12,807
14,707
16,229
(1,264)
(935)
(700)
(700)
(700)
Dividends paid
(6,365)
(5,418)
(6,422)
(7,431)
(8,301)

Net cash flow
Equity finance
(86)
(631)
(95)
(95)
(95)
1,618
5,823
7,490
8,003
10,070
Debt finance
(384)
(4,402)
(5,970)
(7,603)
(8,586)
Movement in cash
1,234
1,421
1,520
400
1,484
1,613
1,691
1,477
1,655
1,689
474
651
748
825
974
2009A
2010A
2011E
2012E
2013E
Management guides for

IDR9.5-10.5t capex. at
Telkomsel
Per share (IDR)

8,381
9,611
10,029
11,174
12,133
(18,639)
(14,358)
(14,435)
(13,248)
(13,654)
Net working capital
(1,521)
(10,259)
(4,747)
(4,406)
(2,074)
76,420
75,832
76,372
76,473
75,750
66,161
71,085
71,966
74,399
74,229
Goodwill
2,428
1,785
1,958
2,131
2,304
Investments
Other assets
2,525
3,411
3,421
3,433
3,445
Invested capital
71,115
76,280
77,345
79,962
79,978
Cash & equivalents
(7,805)
(9,120)
(10,640)
(11,039)
(12,524)
Short term debt
8,078
6,115
6,115
6,115
6,115
Long term debt *
14,566
16,656
16,147
15,089
10,589
Net debt
14,839
13,651
11,622
10,165
4,180
Deferred tax
3,343
4,074
4,074
4,074
4,074
Other liabilities
3,010
2,141
1,094
2,493
2,139
38,990
44,419
47,673
49,627
55,161
Total equity
Minority interests
10,933
11,996
12,882
13,603
14,424
Invested capital
71,115
76,280
77,345
79,962
79,978
Per share (IDR)

1,982
2,258
2,424
2,523
2,804
1,859
2,168
2,324
2,415
2,687
6.0
Financial strength
Net debt/equity (%)
29.7
24.2
19.2
16.1
15.2
13.7
11.3
9.8
3.9
Current ratio (x)
0.6
0.9
1.0
1.1
1.2
6.7
9.5
11.5
13.6
20.2
2013E
Valuation
2009A
2010A
2011E
2012E
Recurring P/E (x) *
13.1
12.2
12.0
11.4
10.2
15.4
14.4
14.2
13.3
11.9
Reported P/E (x)
10.2
12.3
12.2
12.0
11.4
Dividend yield (%)
4.0
4.5
4.6
5.3
5.9
P/CF (x)
4.4
4.2
4.8
4.3
4.2
P/FCF (x)
15.1
11.0
9.6
8.7
7.3
Price/book (x)
3.6
3.2
3.0
2.8
2.5
3.8
3.3
3.1
3.0
2.7
EV/EBITDA (x) **
4.5
4.4
4.5
4.3
3.9
5.1
5.1
5.2
4.9
4.5
2.3
2.2
2.1
2.1
2.0
Relatively low gearing vs

regional peers we cover
Based on a 60% payout.
Sources: Telkom Indonesia; BNP Paribas estimates
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
XL Axiata
2009A
2010A
2011E
2012E
2013E
Revenue
13,880
17,637
18,952
20,473
21,957
13,880
17,637
18,952
20,473
21,957
(7,675)
(8,350)
(9,265)
(10,127)
(10,774)
6,205
9,286
9,687
10,346
11,183
(3,741)
(4,122)
(4,763)
(5,214)
(5,593)

Operating costs
Operating EBITDA
Depreciation
Operating EBIT
2,464
5,164
4,924
5,132
5,590
(1,310)
(1,129)
(814)
(761)
(685)
Associates
Non recurring items
1,210
(167)
Profit before tax
2,363
3,868
4,110
4,371
4,905
Tax
(654)
(977)
(1,027)
(1,093)
(1,226)
Profit after tax
Net financing costs
1,709
2,891
3,082
3,279
3,679
Minority interests
Preferred dividends
Other items
1,709
2,891
3,082
3,279
3,679
Reported net profit

(346)
144
1,363
3,035
3,082
3,279
3,679
Recurring EPS *
182
357
362
385
432
Reported EPS
228
340
362
385
432
DPS
0.00
107
145
193
259
Driven by data and VAS

revenue growth.
Per share (IDR)
Growth
Revenue (%)
14.2
27.1
7.5
8.0
7.2
20.9
49.7
4.3
6.8
8.1
Operating EBIT (%)
8.1
109.6
(4.7)
4.2
8.9
Recurring EPS (%)
269.9
96.5
1.6
6.4
12.2
Reported EPS (%)
(10,782.1)
49.3
6.6
6.4
12.2
44.7
52.7
51.1
50.5
50.9
17.8
29.3
26.0
25.1
25.5
9.8
17.2
16.3
16.0
16.8
Net margin (%)

27.7
25.3
25.0
25.0
25.0
0.0
30.0
40.0
50.0
60.0
Interest cover (x)
1.9
4.6
6.1
6.7
8.2
16.8
9.1
9.1
9.1
9.1
Inventory days
Debtor days
Creditor days
Operating ROIC (%)
ROIC (%)
ROIC - WACC (%)
8.5
17.9
17.1
17.0
18.0
7.8
16.5
15.7
15.6
16.5
ROE (%)
20.8
29.6
24.1
22.0
21.7
ROA (%)
8.2
14.2
13.1
12.9
13.5
2009A
2010A
2011E
2012E
2013E
Voice
7,064
8,457
8,037
8,207
8,481
SMS
2,703
3,477
3,925
4,176
4,449
Data, VAS & Others
1,259
2,332
3,353
4,256
5,028
Intercon & Roaming
1,551
1,727
1,737
1,823
1,898
Others mobile
Other telco services
194
158
158
158
158
1,109
1,487
1,742
1,853
1,945
Margins to stay healthy at

above 50%
Decline due to enlarged

shareholders fund as our
payout ratio assumptions
are conservative
Sources: XL Axiata; BNP Paribas estimates
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
XL Axiata
2009A
2010A
2011E
2012E
2013E
1,363
3,035
3,082
3,279
3,679
Depreciation
3,741
4,122
4,763
5,214
5,593
2,709
2,187
(64)
1,597
(138)
Recurring cash flow
7,813
9,345
7,781
10,089
9,134
(95)
(550)
878
(836)
823
(5,283)
(4,848)
(6,000)
(6,000)
(6,000)
2,436
3,947
2,659
3,253
3,957
159
(209)
(700)
Dividends paid
(911)
(1,233)
(1,639)
Net cash flow
2,595
3,738
1,749
1,320
2,318
Equity finance
2,786
(5,797)
(4,119)
(1,245)
(1,203)
(1,651)
(416)
(381)
504
117
666
1,040
1,098
915
1,186
1,074
324
464
313
382
465
2009A
2010A
2011E
2012E
2013E

Capex - maintenance
Debt finance
Movement in cash
Higher capex as XL
accelerates the roll-out of
its data network
Management guides for

progressive increase in
payout ratio
Per share (IDR)

1,259
1,862
1,838
2,210
2,142
(3,533)
(3,586)
(4,440)
(3,976)
(4,731)
Net working capital
(2,274)
(1,724)
(2,602)
(1,766)
(2,589)
23,616
23,197
24,434
25,220
25,627
21,342
21,473
21,832
23,454
23,038
Goodwill
112
33
33
33
33
Investments
Other assets
1,644
1,793
1,927
2,082
2,232
23,099
23,299
23,792
25,569
25,303
Cash & equivalents
(748)
(366)
(870)
(987)
(1,654)
Short term debt
2,475
977
977
977
977
Long term debt *
10,988
9,202
8,702
8,206
7,206
Net debt
12,716
9,813
8,809
8,196
6,529
Other liabilities
1,580
1,771
1,096
1,440
802
Total equity
8,803
11,715
13,887
15,932
17,972
23,099
23,299
23,792
25,569
25,303
Invested capital
Deferred tax
Minority interests
Invested capital
Net debt declines as we

have assumed XLs annual
dividends are lower than
FCF
Per share (IDR)

1,035
1,377
1,632
1,873
2,112
1,035
1,377
1,632
1,873
2,112
Financial strength
Net debt/equity (%)
144.4
83.8
63.4
51.4
36.3
46.4
36.0
30.3
26.8
20.6
Current ratio (x)
0.3
0.5
0.5
0.6
0.7
2.9
4.5
4.3
5.3
6.8
2009A
2010A
2011E
2012E
2013E
Valuation
Recurring P/E (x) *
28.4
14.4
14.2
13.4
11.9
36.4
18.5
18.2
17.1
15.3
Reported P/E (x)
22.6
15.2
14.2
13.4
11.9
Dividend yield (%)
0.0
2.1
2.8
3.7
5.0
P/CF (x)
4.9
4.7
5.6
4.3
4.8
P/FCF (x)
15.9
11.1
16.5
13.5
11.1
Price/book (x)
5.0
3.7
3.2
2.8
2.4
5.0
3.7
3.2
2.8
2.4
EV/EBITDA (x) **
8.9
5.9
5.5
5.1
4.6

10.7
7.3
6.8
6.2
5.7
2.4
2.3
2.2
2.0
2.0
Sources: XL Axiata; BNP Paribas estimates
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
History of change in investment rating and/or target price

Indosat (ISAT IJ)
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Date
Reco
TP
REDUCE
6,200.00
10,555
18-Oct-07
9,555
1-Nov-09
BUY
6,350.00
3-Nov-10
HOLD
5,800.00
28-Jul-11
BUY
6,600.00
8,555
7,555
6,555
5,555
4,555
3,555
(IDR)
Indosat
Target Price
Choong Chen Foong started covering this stock from 02-Nov-2009

Price and TP are in local currency
Valuation and risks: Key downside risk to our DCF-based TP is a failure to compete with rivals and a subsequent loss of market share
Source: Bloomberg, BNP Paribas
Telkom Indonesia (TLKM IJ)

Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
12,500
Date
Reco
TP
18-Oct-07
BUY
11,750.00
11,500
10,500
9,500
8,500
7,500
6,500
5,500
4,500
(IDR)
Telkom Indonesia
Target Price
Choong Chen Foong started covering this stock from 07-Sep-2009

Valuation and risks: Key downside risks to our DCF-based TP for Telkom are: a) aggressive price cutting by competitors may result in loss of market share for Telkomsel or
reduced margins; and b) Telkom overpays for acquisitions
XL Axiata (EXCL IJ)

Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
7,729.00
Date
Reco
TP
9-May-11
BUY
7,150.00
6,729.00
5,729.00
4,729.00
3,729.00
2,729.00
1,729.00
729.00
(IDR)
XL Axiata
Target Price
Choong Chen Foong started covering this stock from 10-May-2011

Valuation and risks: Risks to our DCF-based TP are intense market competition and regulatory risks.
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
Disclaimers and Disclosures Appendix

ANALYST(S) CERTIFICATION
Foong Choong Chen, BNP Paribas Capital (Malaysia) Sdn Bhd, +603 2179 6238, choongchen.foong@asia.bnpparibas.com.
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect
the personal view of the analyst(s) with regard to any and all of the subject securities, companies, or issuers mentioned in this report; (ii) no part of the
compensation of the analyst(s) was, is, or will be, directly or indirectly, relate to the specific recommendation or views expressed herein; and (iii) is not
aware of any other actual or material conflicts of interest concerning any of the subject securities companies, or issuers referenced herein as of the time of
this certification.
Analysts mentioned in this disclaimer are employed by non-US affiliate of BNP Paribas Securities Corp., and is not registered/ qualified pursuant to NYSE
and/ or FINRA regulations.
GENERAL DISCLAIMER
This report was produced by BNP Paribas Capital (Malaysia) Sdn Bhd, a member company of the BNP Paribas Group. "BNP Paribas is the marketing name
for the global banking and markets business of BNP Paribas Group1. This report is for the use of intended recipients only and may not be reproduced (in
whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be
bound by the terms and limitations set forth herein.
BNP Paribas analysts prudently perform analysis and create quantitative models and estimates derived from their own review of publicly available data
without any assistance from any represented company. BNP Paribas analyst estimates and models reflect the analysts current judgment only; they are
neither all-inclusive nor can they be guaranteed. The analysts analysis and models are subject to change based on various other factors. Valuations are
based on internal quantitative models and qualitative interpretation. No representation or warranty, express or implied, is made that such information or
analysis is accurate, complete or verified and it should not be relied upon as such.
Analysts' compensation is not linked to investment banking or capital markets transactions performed by BNP Paribas or the profitability or revenues of
particular trading desks.
BNP Paribas analysts may participate in company events such as site visits and are prohibited from accepting payment by the company of associated
expenses unless pre-approved by authorized members of Research management.
This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of
individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other
investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report.
Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the
recipients own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this
report may not be available for sale in certain jurisdictions.
BNP Paribas is not aware of any other actual or material conflicts of interest concerning any of the subject securities and companies referenced herein as of
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This report may be distributed in the United States only to major institutional investors (as such term is defined in Rule 15a-6 under the Securities
Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major institutional investor. Where this report has
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person, in accordance with FINRA requirements concerning third party affiliated research. All U.S. institutional investors receiving this report should effect
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This report is distributed in Singapore by BNP Paribas Securities (Singapore) Limited ("BNPPSSL") and may be distributed in Singapore only to an accredited
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Regulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore, regarding the disclosure of certain interests in, or
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This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street Sydney
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Regulations 2001, division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the Corporations Act 2001).
To our readers in Taiwan: Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co., Ltd. Such information is for
your reference only. The reader should independently evaluate the investment risks and is solely responsible for their investment decision. Information on
securities that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such
securities. BNP Paribas Securities (Taiwan) Co., Ltd. may not execute transactions for clients in these securities. This publication may not be distributed to
the public media or quoted or used by the public media without the express written consent of BNP Paribas.
The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into whose possession
this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by the foregoing
instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any
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All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on a
particular stock, please contact the relevant BNP Paribas research team or the author(s) of this report.
1
No portion of this report was prepared by BNP Paribas Securities Corp. personnel, and references to BNP Paribas in this General Disclaimer section and
in the immediately following Important Disclosures section refer to (BNP Paribas Capital (Malaysia) Sdn Bhd) only.
10
BNP PARIBAS
19 OCTOBER 2011
INDONESIA TELECOMS
Foong Choong Chen
IMPORTANT DISCLOSURES
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this
report:
Company
Disclosure (as applicable)
BNP Paribas represents that:

1.
Within the past year, it has managed or co-managed a public offering for this company, for which it received fees.
2.
It had an investment banking relationship with this company in the last 12 months.
3.
It received compensation for investment banking services from this company in the last 12 months.
4.
It beneficially owns 1% or more or the market capitalization of this company.
5.
It makes a market in securities issued by this company.
6.
The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position
in securities issued by this company or derivatives thereof.
7.
The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company.
Additional Disclosures
Within the next three months, BNP Paribas may receive or seek compensation in connection with an investment banking relationship with one or more of
the companies referenced herein.
Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in
our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this
note or your BNP Paribas representative.
All share prices are as at market close on 18 October 2011 unless otherwise stated.
RECOMMENDATION STRUCTURE
Stock Ratings
Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price.
BUY (B). The upside is 10% or more.
HOLD (H). The upside or downside is less than 10%.
REDUCE (R). The downside is 10% or more.
Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a
temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.
* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will
reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our
recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.
Industry Recommendations
Improving (): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months.
Neutral ( ): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months.
Deteriorating (): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months.
Country (Strategy) Recommendations
Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine
market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index
returns relative to the market cost of equity.
Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market
recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equity.
Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine
market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index
returns relative to the market cost of equity.
RATING DISTRIBUTION (as at 19 October 2011)

Total BNP Paribas coverage universe
557
Investment Banking Relationship
(%)
Buy
344
Buy
4.60
Hold
158
Hold
2.50
54
Reduce
1.80
Reduce
Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report.
2011 BNP Paribas Group
11
BNP PARIBAS
19 OCTOBER 2011

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SECTOR REPORT

BUY 4,850.00 5,650.00

TOP STOCK PICK

Rel to MSCI Indonesia

Foong Choong Chen

PREPARED BY BNP PARIBAS SECURITIES ASIA

Foong Choong Chen

Premium-rate SMS services temporarily stopped

Foong Choong Chen

Cost of sales ex depreciation

Gross profit ex depreciation

Other operating income

Profit before tax

Profit after tax

Recurring non operating income

Reported net profit

Recurring net profit

Driven by strong growth in

Per share (IDR)

Operating EBIT (%)

Recurring EPS (%)

Reported EPS (%)

Operating EBITDA (%)

Operating EBITDA margin (%)

Operating EBIT margin (%)

Net margin (%)

Dividend payout on recurring profit (%)

Interest cover (x)

Revenue By Division (IDRb)

Operating ROIC (%)

Higher due to lower staff

*Pre exceptional, pre-goodwill and fully diluted

Sources: Indosat; BNP Paribas estimates

Foong Choong Chen

Recurring net profit

Associates & minorities

Capex - new investment

Free cash flow to equity

Change in working capital

Net acquisitions & disposals

Per share (IDR)

Working capital liabilities

Net working capital

Tangible fixed assets

Operating invested capital

Cash & equivalents

Short term debt

Long term debt *

* includes convertibles and preferred stock which is being treated as debt

Per share (IDR)

Tangible book value per share

Current ratio (x)

CF interest cover (x)

Recurring P/E (x) *

Recurring P/E @ target price (x) *

Reported P/E (x)

Dividend yield (%)

Price/tangible book (x)

EV/EBITDA @ target price (x) **

EV/invested capital (x)

* Pre exceptional, pre-goodwill and fully diluted

Net gearing to decline as

Based on a 50% ratio

** EBITDA includes associate income and recurring non-operating income