NISP Higher interest expenses and non cash item drags down Indosat’s profit (ISAT, Rp4,650)

• Indosat explained that higher interest expenses dragged down its profit in 1H10 period, the company paid Rp1.1tn of interest expense in 1H10 compared to Rp882.6bn a year earlier. This was also added by losses from derivatives of Rp262.6bn and lower forex gains during 1H10 period.

• However, the company’s operational performance also posted deterioration in 1H10 where operating income decreased by 16.7% YoY to Rp1.6tn. However, this was largely due to higher non-cash depreciation expenses of Rp3.0tn compared to Rp2.4tn in 1H09.

• As such, the company’s net profit came way below consensus expectation at Rp287.1bn vs market expectation of Rp1.4tn for full year 2010.

• ISAT is trading at 2011F consensus PER of 13.9x and EV/EBITDA of 4.4x.