TLKM
Contact our analyst Eka
18th November, 2020
BUY
Price Rp 3,200
Target price Rp4,300
BUY
Price Rp 3,200
Target price Rp4,300
Enterprise business improved
- Enterprise revenue of IDR 11.5 trillion in 9M2020, declined by -23% YoY but that’s better than a -35% decline in 1H2020, or growth of 9.4% QoQ. The improvement is in line with TLKM’s strategy to reduce low margin businesses.
- The demand for Data Centers, Cloud, Application services and Fixed Broadband increased In 9M2020 in line with the rising trend of digital businesses.
- Corporate clients are still the biggest contributors to enterprise business revenue at 56%, followed by government 23% and small and medium-sized businesses, 21%.
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Indihome keeps Growing
Margin Improved
Valuation: Maintain BUY with TP 4,300
- IndiHome kept their growth momentum in 9M2020 and the revenue contribution increased to 16% from 13%. Indihome recorded revenue of IDR 16.1 trillion up 17.1% YoY.
- The growth is inline with the increase in IndiHome new subscribers in 9M2020, +752k and +304k in 3Q2020. With 9M2020 new additions we expect TLKM can reach the 2020 subscriber target.
- TLKM’s total Indihome subscribers reached 7.76 million, and only needs an additional +240k subscribers to reach the 2020 target of 8 million.
Margin Improved
- As of 9M2020, TLKM revenue decreased slightly by -2.6% YoY to IDR 99.94 trillion In 9M2020.
- TLKM is maintaining expenses well and total expenses in 9M2020 decreased by 3.2% YoY to IDR 66.9 trillion with Operation, Maintenance & Telecommunication Services costs down significantly by 19.2% YoY.
- EBITDA grew 7.1% YoY to IDR 53.6 trillion in 9M2020, with an EBITDA margin of 53.6%.
- Net Income recorded +1.3% YoY growth to IDR 16.7 trillion with an improved Net Income Margin of 16.7% due to cost efficiency and the impact of PSAK 72 and 73 adoption.
- We are still expecting flat to slightly positive-growth in 2020F net income as we estimate the current trends will likely continue until the end of 2020 and will drive growth of mobile and consumer broadband.
- A new positive catalyst is Telkomsel’s investment in Gojek after selling their telecommunication towers to Mitratel for IDR 10.3 trillion. Telkomsel will now focus on its core business of creating a digital ecosystem and providing digital services.
Valuation: Maintain BUY with TP 4,300
- We are targeting TLKM to reach IDR 4,300, 35% upside, which is a 18x PE valuation within one year. We recommend to BUY.
Previously