CIMB 4QFY09 Results – Indosat – Turnaround starting to take shape

We upgrade Indosat to Neutral from Underperform. Core FY09 net profit was 1% ahead of our forecast but below consensus by 34%. Indosat will be hosting a conference call and releasing its information memorandum which contains more operational detail on Monday, 29 Mar. While we are not privy to the one-off item in 4Q09, we believe it relates to accelerated depreciation and have stripped out an estimated Rp189bn as we normalise depreciation charges to 3Q09 levels. In light of the strong 4Q09, we raise our FY10-11 numbers by 52-60% as we bump up our revenue forecasts by 11-12% to reflect higher subscriber assumptions and a 3.5%-pt rise in EBITDA margins from cost controls. In accordance with our earnings upgrade, our DCF-based target price (WACC: 12.8%) rises from Rp4,000 to Rp6,340. We upgrade the stock to NEUTRAL as we see the first fruits of its management reshuffle and new strategy.