Mansek ISAT:1H10 results hurt by higher financing cost and lower forex gains (ISAT,Rp4,625,Buy,TP:Rp5,400)

As we reported last week,ISAT ’s net profit fell to Rp287bn (-72%yoy)even though operationally the results were in-line on revenue and operating levels.The rise in financing costs (+22%yoy)to Rp1.1tn and lower forex gain due to Rupiah strengthening (-49%yoy)of Rp370bn led to the shortfall in net earnings way below consensus and ours.Additionally, 1H10 subscribers were at 37.8mn (+35%yoy),however this is lower than the subscriber base in 1Q10 of 39.1mn.

Apparently,among the 3 major telco operators,only Indosat registered a qoq decline on subscribers as of 1H10.On the bright-side,despite the drop in subscriber numbers,its cellular revenues grew the highest qoq at 7.7%versus EXCL and Telkomsel ’ s 4.2%and 5.7% growth respectively.Among the big 3 operator ’s revenue market share of ISAT stood at 18% and continues to trail Telkom (66%revenue market share)but is still ahead of EXCL (which accounted for 16%revenue market share among the 3 operators).Currently the stock trades at PER10F 15.4x.