CIMB Indosat Quick takes - Focusing on non-voice and ex-Java

(ISAT IJ / ISAT.JK, NEUTRAL - Maintained, Rp5,500 - Tgt. Rp6,000, Telecommunications)

Maintain NEUTRAL on Indosat. Following the release of operational statistics and a recent results conference call, we cut our FY10-12 core net profit estimates by 6-10% and DCF-based (WACC 12.8%) target price from Rp6,340 to Rp6,000 after lowering our margin expectations and raising depreciation assumptions. The telco outlined its strategy for FY10 which hinges largely on capturing data revenue and higher-value users and expansion to 12 cities outside Java. It also hopes to cement its leadership in large screen/wireless broadband, although we are more cautious about the economics of this segment. Indosat is trading at a small premium to its peers and we would be looking for signs of a sustainable turnaround for stock re-rating.