Indosat: upgrade to Neutral from U/P
Comment from Macquarie coal trading desk
Ken Yap (analyst) has upgraded Indosat (ISAT) to Neutral (from Underperform previously). The stock has traded down to his target price of Rp4,500. He thinks valuation is now cheap for ISAT, on PER of 9.7x 2009E. On a PER basis, this puts ISAT on par with PT Telkom (TLKM IJ, Rp6,500, Outperform, TP: Rp7,900) at 9.8x 2009E PER. Historically, ISAT has always traded at a premium to TLKM on a PER basis due to the higher depreciation (EV/EBITDA of slightly above 3x).
Why is Ken Yap sitting on the fence for now?
He hopes to gain a clearer view on QTEL’s plans for Indosat, after the scheduled 4Q08 release and analyst briefing on Friday, 27 February. Now that Qatar Telecom(QTEL QD, QR95.20, NR) is firmly in the driver's seat, we could possibly see a change in ISAT's strategy that could lead to the company doing better than we and the market are currently forecasting. But, there could also be potential disappointment in the short term as changes to operations and strategy may take time.
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