DBS Indosat: Hold; Rp4,550; TP Rp5,500; ISAT IJ

2Q10 below market expectations

Indosat's 1H10 result highlight was released yesterday. 2Q10 EBITDA of Rp2.4tr (up 6.8% qoq) was inline with our expectations but below market expectations. Net profit of only Rp9bn (down 96.7% qoq) was much below our and market expectations. While the company did not indicate the reason for lower profit, we believe that higher depreciation and forex losses could be the key reasons.

EBITDA margins improved to 48.9% in 2Q10 from 47% in 1Q10, due to cost cutting efforts. Operationally the company added only 0.1m cellular subscribers, disappointing but mostly expected after over 6m additions in 1Q10. Full results would be released on 24th August followed by conference call.