Credit Suisse: INDOSAT (ISAT): Indicative 1Q suggests cost control - Management turnaround

ISAT 1Q results maybe out next month, while indicative 1Q10 number from QTEL numbers showed In line 3% QoQ decline in both Revenue and EBITDA. The key is obviously 1Q always seasonal low after 4Q and Management turnaround is clearly reflected in flattish quarterly EBITDA margin! At Rp5,800- ISAT is trading on 20.7x-16.3x 2010F-2011F PER (consensus is on 18.2x-15.3x 2010-11 PER) and implying 22% upside to DCF Rp7,100. We maintain Buy ISAT on expected further earnings upgrades due to management turnaround story and 22% upside to DCF (Previous Report attached).

· Colin McCallum: Q-Tel recent 1Q10 (21 April 2010) announcement made reference to strong YoY growth in Indonesia, with a total subscriber base of 39.8mn for Indosat as at 31st March 2010. Using the average exchange rates for QAR and IDR during 1Q10, this implies that Indosat generated Rp4.8tn in total revenue (including IDD,MIDI and cellular) in 1Q10, and Rp2.3tn in EBITDA. This represents a 3.1% QoQ decline in revenue, relatively shallow given the normal seasonal slowdown in revenue into 1Q. Improving cost control resulted in the EBITDA margin remaining flat QoQ despite the seasonal downturn in revenue, again, a reasonably good result.

· Looking YoY, Indosat looks to have delivered 7.4% total revenue growth and 7.6% EBITDA growth. We note that 1Q10 figures already represent 23.4% and 22.9% of our FY10 figures respectively. Given that Indosat had suffered a further 1.7% QoQ decline in revenue and 1.3% QoQ decline in EBITDA 2Q09, and a further 6.3% QoQ decline in EBITDA in 3Q09 as the management transition was completed, Indosat’s YoY comps will become easier throughout the year. Thus having seen a strong implied performance in the seasonally weak 1Q10, we are increasingly confident that Indosat will be able to deliver the 12.2% total revenue growth and 16.7% total EBITDA growth that we forecast for FY10 as a whole.