I reiterate this is TIME to BUY ISAT given 1) Since New CEO in August 2009, 4Q-1Q-3Q Cellular continued to grow from 16.9% 3Q09 to 18.0%-18.2%-18.7%, 2) 2Q outperformance in term of growing QoQ Cellular Growth to back to #2 Operator with EBITDA margins growth, 3) NEW FY10 Management guidance, there is room for earnings upgrade, and 4) share price underperformance YTD and in the past 5 years! At Rp4,450- ISAT is trading on 15.9x-12.5x 2010F-11F, 4.8% 2011F Dividend Yield, and implying 60% upside to DCF Rp7,100 (implies 20x 2011F PER), we reiterate BUY ISAT!
· Colin McCallum (Daily attached): Indosat has finally released official guidance for FY10. Lack of guidance has arguably placed Indosat at a disadvantage in terms of investor “mind-share” in Indonesia, and has been misconstrued as a lack of control over the business by new management. Indosat’s FY10 guidance, just released, is for 16-17% cellular revenue growth, a 12-14% drop in non-wireless revenues, 48-49% EBITDA margins and capex of Rp8.5-9.0 tn. The only previous guidance released by management, on 11 May 2010, was for cash capex of Rp9.1-10.9 tn.
· We would reiterate that Indosat’s cellular revenue grew 7.7% QoQ into 2Q10, faster than Excelcom, which grew service revenue by 4.2% QoQ and Telkomsel (not listed) which grew revenue 5.7% QoQ into 2Q10. It seems hard to deny that implied 17.0% and 10.0% YoY cellular and total revenue growth figures, implied YoY EBITDA growth of circa 12.9%, and capex 20.4% lower YoY, all represent improving trends. Our OUTPERFORM rating is maintained.
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