BASML - INDO '08 preview on TLKM

Weaker-than-expected FY08 result could lead to negative sentiment on TLKM. Official result is not out yet, but Minister SoE disclosed the bottom line yesterday. TLKM FY08 net profit could fall 20% YoY to Rp 10.3tn, lower than ML Reena Verma's expectation of Rp 11.5tn and consensus Rp 11.6tn. Details not out yet, but media speculated could be related to FX losses. We rate TLKM with Underperform as forecast earnings recovery in CY09 seems priced in. Also, the stock is not cheap at 12x '09 P/E and 4x EV/EBITDA, which is at the top-end of its long-term trading range despite slower earnings outlook. We forecast earnings CAGR at 11% over CY08-10E vs 27% over CY05-07A.