3Q18 Result Update, 02-Nov-2018

XL Axiata (EXCL IJ)

3Q18 results: Data volume support EXCL revenue

Investment Summary BUY

EXCL revenue was within our expectation, and revealed an improvement of +5.4% Key Information
QoQ to Rp16.9tn. Operating profit was Rp 973bn and EBITDA was Rp6.2tn, translated Last Price: Rp 2,220
to operating margin of 5.8% (vs. our estimate of 5.7%) and EBITDA margin of 36.5% 52 Week High/Low: Rp 3,570 / 1,750
(vs. our estimate of 38.0%). EXCL still recorded a net loss of Rp145bn in 9M18, Target Price/Upside: Rp 3,100 (+39.6%)
dragged down by Rp450bn loss in foreign exchange. Overall, we are satisfied with the Prev. Target Price Rp 3,540
operational performance of EXCL, and thus maintain our forecast for the moment. We
maintain our target price for EXCL at 5.7x EV/EBITDA’18 (3-year average), translated As of Dec 2017 2018F 2019F
Revenue 22,876 23,308 24,408
to fair value of Rp 3,100/share, offering potential upside of 39.6% - still with a BUY.
Net Income 375 123 866
EPS (Rp ) 35.1 11.5 81.0
9M18 Revenue Rp 16.9tn (-0.1% YoY, +5.4% QoQ) representing 72.5% forecast EPS growth (%) (0.1) (67.3) 604.9
EXCL revenue was within our expectation, and it showed an improvement of +5.4% ROAE (%) 1.8 0.6 3.9
Debt (Cash) – 0.8 0.8 0.8
QoQ to Rp16.9tn. Data grew by 15.2% YoY to Rp10.8tn (63.6% of total revenue) while
Equity ratio (x)
legacy business fell by 18.9% YoY to Rp 6.1tn. Data traffic increased by 78% YoY to
1,568 PB, but data yield was down by 40.7% YoY to Rp 6,155/GB (-7.5% QoQ). Stock and financial data
Shares Outstanding: 10.7bn
Going forward, we think that revenue will be driven by data volume expansion rather
Market Cap: Rp 23.7tn
than price appreciation. EXCL network speed was reported by ‘TechInAsia’ clocked P/E2018: 193.3x
at 10-11 Mbps, which we think is adequate to buffer a HD video – while EXCL itself is P/BV2018: 1.1x
not blocking Netflix (Telkomsel is blocking Netflix).
Major Shareholders %
Operating and EBITDA margin at 5.8% and 36.5%, within our forecast Axiata Investments Ltd 66.36
Brades Investment 1.91
We note efficiency improvement in EXCL, as operating expense only rose by 2.2%
Sun Life Financial 1.61
YoY to Rp15.9tn, while its network expanded by 18.5% YoY to 116,134 sites –
translated to an opex of Rp137.0mn/BTS (-13.8% YoY from Rp159.0mn per 9M17). Price Performance 3mth 6mth 12mth
Absolute (%) -18.7 4.7 -36.6
EXCL operating profit was Rp973bn, translated to operating margin of 5.8% (vs. our
Relative (%) -15.4 7.4 -33.2
5.7% estimate). EBITDA was recorded at Rp 6.2tn (vs. Rp8.8tn, accounting for 73.2%
forecast), and EBITDA margin of 36.5% (vs. our estimate of 38.0%). Management is
optimistic they can maintain their high-30’s EBITDA margin in 2018.

Bottom line: dragged down by forex loss of Rp445bn

EXCL was afflicted with a net loss of Rp145bn in 9M18, dragged down by a Rp450bn
foreign exchange loss, while there was no more loss from its JV, after it divested its
share in Elevania. EXCL bottom line was rescued by Rp 441.0bn finance income and
Rp129bn in tax benefits. We take prudent notes on the bottom line, but overall we are
satisfied with operational performance of EXCL, and thus maintain our forecast for the
moment.

FREN is currently their closest competitor

With Indosat Ooredoo (ISAT) still involved in an early transformation, we think that the
closest competitor for EXCL is FREN – but only in selected areas of Java. FREN is
offering data at Rp 2,100/GB for its ‘unlimited’ packages. But, EXCL clearly has more
advantages in coverage area, while its pricing is still cheaper than that of Telkomsel.

We think EXCL could retain value-for-money services with decent quality. We also
note that EXCL is getting more aggressive about reaping a premium market, by
offering an attractive smartphone bundling package, starting from Rp 150,000/month.
Thus, we are optimistic that EXCL will retain their position and market share in the
next 2-3 quarters.
Etta Rusdiana Putra
etta.rusdianaputra@kresnasecurities.com
Maintain Buy with target price of Rp 3,100/share +62 21 2939 1900 ext. 7042
We maintain our target price for EXCL at 5.7x EV/EBITDA’18 (3-year average),
translated to a fair value of Rp 3,100/share, offering potential upside of 39.6% - still
with a BUY call.

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 1
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer
 2Q18 Result Update, 6-Aug-2018: XL Axiata (EXCL)

Figure 1: EXCL 3Q18 results

Rpbn 9M17 9M18 %YoY FY18E %FY 2Q18 3Q18 % QoQ Cons % Cons
Revenue 16,903 16,892 (0.1) 23,308 72.5 5,545 5,846 5.4 23,633 71.5
Operating Expenses (15,579) (15,919) 2.2 (21,990) 72.4 (5,206) (5,489) 5.4
Operating Profit 1,324 973 (26.5) 1,319 73.8 339 357 5.3 1,560 62.4
Finance Cost (1,173) (1,243) 6.0 (1,598) 77.8 (414) (448) 8.3
Forex gain (loss) (20) (445) 2,171.5 - nm (215) (158) -26.7
Finance Income 164 441 169.6 458 96.3 205 130 -36.8
JV result (103) - (100.0) - nm - - nm
Others revenue - - nm - nm - - nm
Pretax income 193 (274) (242.2) 179 -153.4 (84) (119) 41.2 491 (55.8)
Income tax/expenses 46 129 183.6 (56) -231.4 (13) 56 -525.3
Profit for the year 238 (145) (160.8) 123 -117.9 (97) (63) -35.1 480 (30.2)
Profitability ratio Chg Chg
EBITDA 6,202 6,162 8,864 2,000 2,176
EBITDA margin 36.7 36.5 (0.2) 38.0 36.1 37.2 1.15
Operating margin 7.8 5.8 (2.1) 5.7 6.1 6.1 (0.01)
Pretax margin 1.1 (1.6) (2.8) 0.8 (1.5) (2.0) (0.51)
Net margin 1.4 (0.9) (2.3) 0.5 (1.8) (1.1) 0.67

Sources: Company, Kresna Securities

Figure 2: Revenue contribution 1H18 Figure 3: BTS Configuration

Legacy (non-data)
Data
6,500 12.0
Growth (%QoQ)
6,000 10.0 28028
3,527
5,500 8.0 37630
5,000 6.0
4.0 2G
4,500
0.8 2.0
4,000 3G
-
3,500 4G
(2.0)
3,000 (4.0)
2,500 (6.0)
2,000 (8.0)
1,500 (10.0) 50476
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18

Sources: Company, Kresna Securities Sources: Company, Kresna Securities

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 2
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer
 2Q18 Result Update, 6-Aug-2018: XL Axiata (EXCL)

Figure 3: Data traffic and yield trends Figure 4: EBITDA and EBITDA margin (%)

EBITDA (Rpbn)
2,400 42.0
EBITDA margin (%)
700.0 45,000
41.0
39,187 40,000 2,300
600.0 40.0
530.2
35,000 2,200
500.0 39.0
30,000
38.0
400.0 2,100
25,000
37.0
300.0 20,000 2,000
36.0
15,000
200.0 1,900 35.0
6,652 10,000
34.0
100.0 43.9 1,800
5,000
33.0
- -
1,700 32.0
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18

1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
Sources: Company, Kresna Securities Sources: Company, Kresna Securities

Figure 5: Profitability ratio Figure 6: EBITDA and EBITDA margin (%)

EBITDA (Rpbn)
2,400 42.0
Operating Margin (%) EBITDA margin (%)
16.0 41.0
Pretax margin (%)
2,300
14.0 40.0
12.0 2,200 39.0
10.0 38.0
2,100
8.0 37.0
2,000
6.0 5.8 36.0

4.0 1,900 35.0

2.0 34.0
1,800
33.0
- (0.9)
2015
1Q16
1H16
9M16
2016
1Q17
1H17
9M17
2017
1Q18
1H18
9M18

1,700 32.0
(2.0) (1.6)
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18

(4.0)
Sources: Company, Kresna Securities Sources: Company, Kresna Securities

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 3
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer
 2Q18 Result Update, 6-Aug-2018: XL Axiata (EXCL)

Figure 7: 2018 EV/EBITDA Band

EV/EBITDA -2 -1 Mean +1 +2
7.5

7.0

6.5

6.0

5.5

5.0

4.5

4.0

3.5
Jan-15

Mar-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

Jul-18

Sep-18
May-15

May-16

May-17

May-18
Sources: Bloomberg Finance L.P, Kresna Securities

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 4
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer
 2Q18 Result Update, 6-Aug-2018: XL Axiata (EXCL)

Key Financials:
EXHIBIT 1: INCOME STATEMENT EXHIBIT 2: BALANCE SHEET
(Rp bn) 2016 2017 2018E 2019F (Rp bn) 2016 2017 2018E 2019F
Revenue 21,341 22,876 23,308 24,408 Cash and equivalent 1,400 2,455 2,119 2,461
Operating Expenses (19,655) (21,217) Trade receivables 637 565 550 556
(21,990) (22,356) Inventories 161 143 129 136
Operating profit 1,687 1,658 1,319 2,052 Other current assets 4,609 4,017 3,706 3,417
Interest Income 261 244 458 443 Total current assets 6,807 7,181 6,505 6,570
Finance cost (1,794) (1,539) (1,598) (1,488)
Pretax profit 186 221 179 1,006 LT prepayments 1,086 879 691 699
Income tax expenses 190 154 (56) (141) Fixed assets 33,183 34,934 34,297 33,301
Profit for the year 376 375 123 866 Other non-current assets 13,821 13,328 13,118 12,979
Total non-current assets 48,089 49,141 48,106 46,978
Total assets 54,896 56,321 54,611 53,548
EBITDA 9,515 8,416 8,864 10,041
BVPS 1,984 2,024 2,025 2,102 Trade payables 6,503 7,476 7,769 8,000
EPS 35.1 35.1 11.5 81.0 Deferred revenue 1,210 1,132 1,142 1,172
EPS growth (0.1) (67.3) 604.9 Current maturities LT 3,973 4,207 2,797 2,685
DPS - - 9.8 0.5 borrowings
Source: Company, Kresna Securities
Other current liabilities 2,792 2,412 2,473 2,496
Total current liabilities 14,477 15,227 14,182 14,353

LT borrowings net 14,394 15,191 14,394 12,709

Other non-current liabilities 4,816 4,273 4,394 4,016
Total Non-current liabilities 19,210 19,464 18,788 16,725
Total Liabilities 33,687 34,691 32,970 31,078
Total Equity 21,209 21,631 21,641 22,471
Total Liability & Equity 54,896 56,321 54,611 53,548
Source: Company, Kresna Securities

EXHIBIT 3: CASHFLOW EXHIBIT 3: KEY RATIO

(Rp bn) 2016 2017 2018E 2019F (Rp bn) 2016 2017 2018E 2019F
Net Income 376 375 123 866 Growth
Depreciation 7,828 6,757 7,545 7,989 Revenue growth (%) (6.7) 7.2 1.9 4.7
CF Operating 6,546 24,800 10,229 9,809 Operating profit growth (%) (46.3) (1.7) (20.5) 55.6
Capex (7,165) (7,902) (6,273) (6,377) Net profit growth (%) n/a (0.1) (67.3) 604.9
Net change in debt (1,293) (15,843) (4,292) (3,090)
Dividend payment - - 123 866 Profitability
CF from Financing (1,293) (15,843) 7,545 7,989 EBITDA margin (%) 44.6 36.8 38.0 41.1
Net margin (%) 1.8 1.6 0.5 3.5
Net Cash Flow 3,312 1,400 2,455 2,119 ROAA (%) 0.7 0.7 0.2 1.6
Cash - beginning (1,912) 1,055 (336) 342 ROAE (%) 2.1 1.8 0.6 3.9
Cash - ending 1,400 2,455 2,119 2,461
Solvency ratio
Source: Company, Kresna Securities
Current ratio (x) 0.5 0.5 0.5 0.5
Net Debt-to-Equity (%) 1.2 0.8 0.8 0.8
Interest coverage (x) 0.9 1.1 0.8 1.4

Activity ratio
Inventory turnover days 2.7 2.3 2.0 2.0
Receivable turnover days 10.7 8.9 8.5 8.2
Payable turnover days 110 118 120 118
Source: Company, Kresna Securities

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 5
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer
 Contact Us

Research Team

Etta Rusdiana Putra, CFTe Robertus Yanuar Hardy Franky Rivan

Economist Research Analyst : Research Analyst: Automotive,
etta.rusdianaputra@kresnasecurities.com Mining, Heavy Equipment Property
robertus.hardy@kresnasecurities.com franky.rivan@kresnasecurities.com

Andreas Kristo Saragih

Research Analyst: Construction,
Cement, Toll Road
andreas.saragih@kresnasecurities.com

Equity Sales
Viviet S.Putri Fani Mailani Laya Aninidto Putra
Institutional Sales Institutional Sales Institutional Sales
viviet.putri@kresnasecurities.com fani.laya@kresnasecurities.com anindito.putra@kresnasecurities.com

Fixed Income Sales

Nurhayatie Sugriatna
Fixed Income Sales – Head Andilla Renny Octavianty
Fixed Income Sales Fixed Income Sales Fixed Income Sales
Nurhayatie.sugriatna@kresnasecurities.com andilla@kresnasecurities.com Renny.octavianty@kresnasecurities.com

Kresna Securities - Kresna Tower 6th Floor - 18 Parc Place SCBD

Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia
T : +62 21 515 2889, F : +62 21 515 5280, W : www.kresnasecurities.com

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 6
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer
 Contact Us

Kresna Securities Branches

Kresna Headquarters
PT. Kresna Securities
Kresna Tower 6th Floor
18 Parc Place SCBD
Jl. Jend. Sudirman Kav. 52-53
Jakarta 12190, Indonesia
T : +62 21 515 2889
F : +62 21 515 5280
W : www.kresnasecurities.com

Bandung Office Surabaya Office Jakarta Office

Paskal Hypersquare Blok A-1 Jl. Sulawesi No.43 Kresna Tower 8th Floor
Jl. Pasirkaliki No. 25-27 Surabaya 60281 18 Parc Place SCBD
Bandung 40181 T : 62 31 501 9888 Jl. Jend. Sudirman Kav. 52-53
T : +62 22 8606 1012 F : 62 31 501 0969 Jakarta 12190, Indonesia
F : +62 22 8606 1020 T : +62 21 515 2889
F : +62 21 515 5280

Pantai Indah Kapuk Office Medan Office Solo Office

Jalan Camar Indah Blok DE No.8 Jl. RA Kartini No. 17-A Office Park C.6, Kawasan TeRp adu
Pantai Indah Kapuk Medan 20152 The Park Jl. Ir. Soekarno
Jakarta 14460 T : +62 61 452 3700 Solobaru, Madegondo, Grogol Sukoharjo - Solo
T : +62 21 5886 009 F : +62 61 452 3600 57112
F : +62 21 5886 010 T : +62 271 669 597
F : +62 271 669 257

Malang Office Bali Office Semarang Office

Jalan Bukit Barisan No. 1 E Jl. Cok Agung Tresna Jl.Gajahmada No.97 unit 7
Malang Pertokoan Griya Alamanda No. 9 Semarang 50134
T : +62 341 508 1858 Renon, Denpasar 80235 Telp : +62 24 769 28455
F : +62 341 507 8443 T : +62 361 248 883 Fax : +62 24 769 28460
F : +62 361 231 725

Pontianak Office Makassar Office Batam Office

Jl. Teuku Umar Jl. Gunung Latimojo No. 120A Komp. Mahkota Raya Blok A No.11 Batam
Komp. Ruko Pontianak Mall Blok C23- Makassar, Sulawesi Selatan Center
24 Lantai 2 T : +62 411 361 5255 Kota Batam – Kepri
Pontianak F : +62 411 361 6780 T : +62 778 748 3346
T : +62 561 760 008 F : +62 778 748 3349
F : +62 561 760 009

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 7
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer
 Contact Us

Disclaimer

Definition of ratings:
BUY = stock return > 10% over the next 12 months (excluding dividend)
HOLD = stock return -10% to 10% over the next 12 months (excluding dividend)
SELL = stock return <10% over the next 12 months (excluding dividend)

Analyst Certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about
the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly
related to the inclusion of specific recommendations or views in this research. The analyst(s) principally responsible for
the preparation of this research has taken reasonable care to achieve and maintain independence and objectivity in
making any recommendations.
This report is for distribution only under such circumstances as may be permitted by applicable law. It has no regard to
the specific investment objectives, financial situation or particular needs of any specific recipient. It is published solely
for informational puRp oses and is not to be construed as a solicitation or an offer to buy or sell any securities or related
financial instruments. No representation or warranty, either expressed or implied, is provided in relation to the accuracy,
completeness or reliability of the information contained herein, except with respect to information concerning Kresna
Securities, its subsidiaries and affiliates, nor is it intended to be a complete statement or summary of the securities,
markets or developments referred to in the report. The report should not be regarded by recipients as a substitute for the
exercise of their own judgement. Any opinions expressed in this report are subject to change without notice and may
differ or be contrary to opinions expressed by other business areas or groups of Kresna Securities as a result of using
different assumptions and criteria.
Kresna Securities is under no obligation to update or keep current the information contained herein. Kresna Securities,
its directors, officers and employees or clients may have or have had interests or long or short positions in the securities
or other financial instruments referred to herein, and may at any time make purchases and/or sales in them as principal
or agent. Kresna Securities may act or have acted as market-maker in the securities or other financial instruments
discussed in this report, and may have or have had a relationship with or may provide or has provided investment
banking, capital markets and/or other financial services to the relevant companies. Employees of Kresna Securities may
serve or have served as officers or directors of the relevant companies. Kresna Securities may rely on information
barriers, such as “Chinese Walls”, to control the flow of information contained in one or more areas within Kresna
Securities, into other areas, units, groups or affiliates of the Company.
The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.
Options, derivative, products and futures are not suitable for all investors, and trading in these instruments is considered
risky. Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely
affect the value, price or income of any security or related instrument mentioned in this report. For investment advice,
trade execution or other enquiries, clients should contact their respective sales representative. Neither Kresna Securities
nor any of its affiliates, directors, employees or agents accept any liability for any loss or damage arising out of the use
of all or any part of this report. Additional information will be made available upon request.

2018 Kresna Securities. All rights reserved. This report may not be reproduced or redistributed, in whole or in part, without
the written permission of Kresna Securities and the firm accepts no liability whatsoever for the actions of third parties in this
respect.

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION AND 8
IMPORTANT DISCLOSURES AT http://www.kresnasecurities.com/kresna2/en/news-report/disclaimer