Indopremier PT Telekomunikasi Indonesia Tbk Rp.7,700 – BUY

TLKM – FY08 and 1Q09 Results

FY09 slow earnings growth for TLKM as well as being a defensive counter were the main reasons for TLKM being laggard in the BEI (graph 1). We had upgraded our recommendation to BUY since January this year and continue to like to the defensive quality of TLKM. In response to the publication of FY08 and 1Q09 results, we lower our current forecast to 5% earnings growth this year for TLKM. Earnings prospects for TLKM will still be driven by legacy cellular (+12%, YOY in 2008), though TLKM has been actively laying the ground to be an integrated phone companies. New Wave revenues contributions increased to 9% in 1Q09 vs. 5% in 1Q08, and TLKM expect to raise its contributions. For investors looking to have exposure in the telecommunications sectors, TLKM is still the choice, given its being a good incumbent operator in terms of capacity, profitability, balance sheet, with decent growth in 2009. Our DCF calculation, with WACC of 12.9% and LTG 3% resulted in new TP of Rp8.588 (vs. previously Rp8.090, change due to lower beta of the stock), still give a potential upside of 12% from yesterday’s closing price of Rp7.700. We maintain our BUY recommendation.