TLKM Nov2022

TLKM

Contact our analyst Eka

17th November 2022
BUY
Price Rp 4,050
Target price Rp5,730

TLKM new strategies

TLKM plans to merge Telkomsel and Indihome in early 2023. With this merger, there is potential for fixed cellular network convergence (fixed mobile convergence / FMC), and synergy between mobile and fixed networks.
The FMC strategy would increase TLKM’s value by distinguishing TLKM’s unique competitive advantage in the market. Also, with FMC, TLKM is expecting greater efficiency in capex and data integration.
TLKM also has another strategic initiative, InfraCo, data center, cloud and B2B digital IT service Co.
TLKM has already unlocked infrastructure value starting with Towers. With this new initiative, TLKM aims at further capex efficiency with improvements in coverage, service and asset utility.
TLKM is also in the process of consolidating data center (DC) assets.

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Stable revenue

TLKM booked stable revenue in 3Q2022, with Indihome and Telkomsel continuing to be the engines of growth. TLKM revenue reached IDR 36.89 trillion up +0.3% YoY. For 9M2022 TLKM maintained single digit growth of +2.7% YoY to IDR 108.87 trillion.
IndiHome recorded +4.4% YoY growth to IDR 7.05 trillion in 3Q2022 or +6.4% growth in 9M2022 to reach IDR 20.88 trillion. The growth is inline with the increase in IndiHome new subscribers and a stable ARPU. Indihome’s total subscribers are now 9 million from 8,6 million last year.
Data, Internet & IT service revenue increased +6.1% YoY to IDR 60.47 trillion in 9M2022 and +7.9% YoY in 3Q2022 boosted by higher cellular data internet revenue +6.2% YoY in the 9M2022.
We are targeting TLKM revenues to reach IDR 150.3 trillion this year as we expect demand will continue to grow.

3Q2022 Results: More losses from GOTO

TLKM booked a lower bottom line profit, -54.5% QoQ to IDR 3.27 trillion with a lower NPM of 8.9% due to an unrealized loss from the change in fair value of the investment in GOTO of IDR 3.38 trillion from a gain in 3Q2021 of IDR 53 billion. For 9M2022, TLKM net income reached IDR 16.58 trillion, a decrease of -12.1% YoY.
After the eight-month lock up period for pre-IPO investors, GOTO’s share price is expected to fall further due to fears of a sell-off, and it will likely be a negative factor for TLKM 2022’s performance.

Valuation: Maintain BUY with TP 5,750

With more expansion strategies and efficiencies , we are targeting TLKM to reach IDR 5,750, 42% upside, which is a 21x PE valuation within one year. We maintain our recommendation to BUY.

Previously

TLKM Aug2022