Indosat
Quick takes - Back to fundamentals - by Kelvin Goh CFA
(ISAT IJ / ISAT.JK, NEUTRAL - Maintained, Rp4,350 - Tgt. Rp4,900, Telecommunications)
We are lowering our target price for Indosat to Rp4,900 based on DCF valuation (from Rp6,300) which was its theoretical price following the end of the partial tender offer by Qatar Telecom. About 95% of minority shareholders, excluding the Indonesian government, have tendered their shares and QTel is only accepting 56.5%. We believe Indosat's FY08 core net profit may exceed our forecast by about 6% due to fairly strong revenue and possibly lower-than-expected amortisation and depreciation. However, we expect to revise our FY09 forecast downwards given a slowing economy. We maintain our NEUTRAL rating on Indosat and urge investors to switch to Telkom Indonesia given Indosat's significantly reduced free float and potential benefits to Telkom from the US$800m released into the market following the partial tender offer.
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