CIMB Telekomunikasi Indonesia Quick takes - RPM reflation and subscriber-driven growth

(TLKM IJ / TLKM.JK, OUTPERFORM - Maintained, Rp8,700 - Tgt. Rp10,100, Telecommunications)

We came away with an unchanged view on Telkom Indonesia following its 3Q09 results conference call. Key takeaways are: 1) Telkomsel has raised its guidance; 2) conditions remain favourable to raise revenue per minute (RPM); 3) the drag in wire lines and fixed wireless continues; 4) an unexpected provision for employee reduction programme (ERP). We lower our FY09 core net profit estimate to account for the ERP and adjust our FY10-11 forecasts by -2.5% to +1.1%. As we roll our target price one year forward, we raise our DCF-based target price to Rp10,100 from Rp9,600 (unchanged WACC of 12.5% and terminal growth of 5.5%). We continue to like Telkom Indonesia as we believe it will thrive in a benign competitive environment coupled with wealth creation in ex-Java islands from which Telkomsel derives 55% of its revenue. A likely stock re-rating catalyst is continued strong growth.