CIMB Telekomunikasi Indonesia Result note - A dull tone

(TLKM IJ / TLKM.JK, NEUTRAL - Maintained, Rp7,400 - Tgt. Rp8,500, Telecommunications)

Telkom's core 1Q09 net profit was below consensus and our forecasts, at only 21% and 17% of the respective FY09 estimates. This was largely due to weaker-than-expected revenue and high depreciation and amortisation charges on the back of aggressive capex. We believe revenue weakness was caused by lower usage after commodity prices plunged. About 55% of Telkomsel's revenue is derived from commodity-driven areas. As commodity prices are now rising, consumer sentiment and usage should be bolstered. We maintain our forecasts and DCF-based target price of Rp8,500 (WACC 12.5%) pending an investors' teleconference. Maintain NEUTRAL. The results reinforce our view that investors should take profit on the stock after its strong run-up and consider higher-beta stocks in the current market rally.