bnp - indonesia telecoms 2011

8/20/2019 BNP - Indonesia Telecoms 2011

1/11

PREPARED BY BNP PARIBAS SECURITIES ASIATHIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. I

SECTOR REPORT

EQUITIES RESEARCH

INDONESIA

INDONESIA TELECOMS

NEUTRALINDUSTRY OUTLOOK

Short-term VAS hicc

SUMMARYBRTI orders temporary stop to premium-r

Indonesian operators have agreed to temporarilySMS subscription services (i.e, ringback tones, neeffective yesterday. The directive from the Indon

Regulatory Body (BRTI) came after a recent publisubscriptions that deducted credit from users wi

OUTLOOK4Q11-1Q12 revenue may be negatively im

This could hurt telcos’ 4Q11-1Q12 revenue. At prservices (VAS) form about 7% of mobile revenue.would depend on how quickly the service is resuof subscribers that renew their subscription. Telcrefund credit deducted previously.

VALUATION

Impact on longer-term earnings unlikely tWe currently have BUYs on Telkom Indonesia (TP(TP: IDR6,250) and Indosat (TP: IDR5,650). Whilemay have a negative short-term impact on revenIndonesian operators, we remain positive as the ilonger-term earnings should be insignifcant. Thestable since easing in March/April 2011, while va operators are cheap by regional standards. TelkoEV/EBITDA of 4.3x, Indosat at 4.6x and XL at 5.1x,

average of 6.0x based on BNPP and Bloomberg c

Foong Choong [email protected]

+603 2179 6238

BNP Paribas Securities Asia research is available on Thomsonsalesperson for authorisation. Please see the important notice

PORTANT DISCLOSURES CAN BE FOUND IN THE DISCLOSURES APPEN

BNPP RECOMMENDATIONS

CompanyBBG

CodeR

Indosat ISAT IJTelkom Indonesia TLKM IJ

XL Axiata EXCL IJ

p

ate SMS service

stop all premium-ratews, content, etc)sian Telecommunication

outcry over unintendedh prepaid accounts.

acted

sent, value-addedhe extent of the impacted and the percentage

os may also have to

o be significant: IDR8,400), XL Axiatahe latest developmentue and earnings ofmpact on medium- tocompetition has beenluations of Indonesianm trades at 2012Ecompared to the Asian

nsensus estimates.

ne, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.b on the back page.

TOP STOCK PI

Company

BBG Code

Share Price

Target Price

1 Year - high

1 year - low

VALUATION SU

Company

Indosat

Telkom Indonesia

XL Axiata

4,194

4,694

5,194

5,694

6,194

6,694

7,194

Oct-10 J an-11

(IDR) XL Axiata

IX

atingSharePrice

TargetPrice

Upside /Downside

BUY 4,850.00 5,650.00 +16%BUY 7,150.00 8,400.00 +17%

BUY 5,150.00 6,600.00 +28%

pparibas.com/index. Please contact your

19 OCTOBER 2011

K

XL Axiata

EXCL IJ

5,150

6,600

6,800

4,525

MMARY

P/E Yld (%)

FY1 FY2 FY2

32.6 25.4 2.0

12.0 11.4 5.3

14.2 13.4 3.7

(19)

(14)

(9)

(4)

1

6

11

16

21

26

Apr-11 Jul-11 Oct-11

(%)Rel to MSCI Indonesia

http://equities.bnpparibas.com/http://equities.bnpparibas.com/http://equities.bnpparibas.com/


2/11

INDONESIA TELECOMS Foong Choong Chen

2 BNP PARIBAS 19 OCTOBER 2011

Premium-rate SMS services temporarily stopped

News

Indonesian operators have agreed to temporarily stop all premium-rate SMS subscription services (i.e.ringback tones, news, content etc) effective today. This is in line with the directive from the BRTI, followinga recent public outcry over unintended subscriptions that deducted credit from users with prepaidaccounts. The BRTI has ordered telco operators to refund the deducted phone credits. Discussions betweenthe BRTI and operators on this matter will start today until 31 December 2011.

Comment

Operators say they will notify the relevant subscribers of the service cessation via SMS. Once the BRTI givesthe green light to resume service, operators will prompt subscribers to opt-in.

Operators may see a dip in VAS revenues in 4Q11-1Q12, due to service cessation and potential revenuereversal from credit refunds. At present, VAS forms about 7% of Indonesian operators’ revenues. Therefore,we believe the extent of the impact will depend on: 1) how quickly the BRTI is able to sort out the issue withoperators, 2) the percentage of subscribers that renew their subscriptions once the service resumes, and 3)how much (if any) operators need to refund to subscribers for the deducted credits.

We currently have BUY ratings on Telkom Indonesia (TP: IDR8,400), XL Axiata (TP: IDR6,250) and Indosat(TP: IDR5,650). While the latest development may have a negative short-term impact on revenue and

earnings of the Indonesian operators, we remain positive as we believe the impact on medium- to longer-term earnings is unlikely to be substantial. The competition remains stable since easing in March/April2011, and valuations for Indonesian operators are cheap by regional standards. Telkom trades at 2012EEV/EBITDA of 4.3x, Indosat at 4.6x and XL at 5.1x, compared to the Asian average of 6.0x based on BNPP.


3/11



Financial statementsIndosat

Profit and Loss (IDRb)Year Ending Dec 2009A 2010A 2011E 2012E 2013E

Revenue 18,824 19,797 20,743 22,070 23,575

Cost of sales ex depreciation 0 0 0 0 0

Gross profit ex depreciation 18,824 19,797 20,743 22,070 23,575

Other operating income 0 0 0 0 0

Operating costs (9,638) (10,171) (10,817) (11,587) (12,242)

Operating EBITDA 9,186 9,626 9,926 10,483 11,333

Depreciation (5,561) (6,152) (6,512) (6,861) (6,928)

Goodwill amortisation (235) (226) 0 0 0

Operating EBIT 3,390 3,248 3,414 3,622 4,405

Net financing costs (1,734) (2,128) (2,085) (2,025) (1,896)

Associates 0 0 0 0 0

Recurring non operating income (150) (112) (112) (112) (112)

Non recurring items 727 74 (566) 0 0

Profit before tax 2,232 1,082 651 1,486 2,397

Tax (677) (358) (163) (371) (599)

Profit after tax 1,555 723 489 1,114 1,798

Minority interests (56) (77) (77) (77) (77)

Preferred dividends 0 0 0 0 0Other items 0 0 0 0 0

Reported net profit 1,498 647 412 1,037 1,721

Non recurring items & goodwill (net) (273) 174 396 0 0

Recurring net profit 1,225 821 808 1,037 1,721

Per share (IDR)

Recurring EPS * 225 151 149 191 317

Reported EPS 276 119 75.78 191 317

DPS 138 59.50 37.89 95.46 158

Growth

Revenue (%) 0.9 5.2 4.8 6.4 6.8

Operating EBITDA (%) (1.1) 4.8 3.1 5.6 8.1

Operating EBIT (%) (24.8) (4.2) 5.1 6.1 21.6Recurring EPS (%) (48.4) (33.0) (1.6) 28.4 65.9

Reported EPS (%) (20.2) (56.8) (36.3) 152.0 65.9

Operating performance

Gross margin inc depreciation (%) - - - - -

Operating EBITDA margin (%) 48.8 48.6 47.9 47.5 48.1

Operating EBIT margin (%) 18.0 16.4 16.5 16.4 18.7

Net margin (%) 6.5 4.1 3.9 4.7 7.3

Effective tax rate (%) 30.3 33.1 25.0 25.0 25.0

Dividend payout on recurring profit (%) 61.2 39.4 25.5 50.0 50.0

Interest cover (x) 2.0 1.6 1.6 1.7 2.3

Inventory days - - - - -

Debtor days 32.1 32.3 32.3 32.3 32.3

Creditor days - - - - -Operating ROIC (%) 7.0 6.5 6.4 6.8 8.4

Operating ROIC - WACC (%) (2.4) (3.0) (3.2) (2.7) (1.1)

ROIC (%) 6.1 5.8 5.7 6.1 7.6

ROIC - WACC (%) (3.2) (3.7) (3.8) (3.4) (2.0)

ROE (%) 6.9 4.6 4.5 5.7 9.1

ROA (%) 4.7 4.6 4.6 5.0 6.1

*Pre exceptional, pre-goodwill and fully diluted

Revenue By Division (IDRb) 2009A 2010A 2011E 2012E 2013E

Cellular 14,300 16,027 17,265 18,796 20,418

MIDI 2,721 2,476 2,340 2,274 2,237

Fixed Telco 1,803 1,293 1,137 1,001 920

Sources: Indosat; BNP Paribas estimates

Driven by strong growth inmobile data, less intensemarket competition and

lesser drag from FixedData business

Depreciation-to-sales ratiois high at 31%

Higher due to lower staff

and operation &

maintenance cost


4/11



Financial statementsIndosat

Cash Flow (IDRb)Year Ending Dec 2009A 2010A 2011E 2012E 2013E

Recurring net profit 1,225 821 808 1,037 1,721

Depreciation 5,561 6,152 6,512 6,861 6,928

Associates & minorities 56 77 77 77 77

Other non-cash items (1,151) 690 (107) (706) 256

Recurring cash flow 5,692 7,739 7,290 7,269 8,982

Change in working capital (1,641) (901) (362) 67 (894)

Capex - maintenance 0 0 0 0 0Capex - new investment (10,685) (6,495) (6,300) (6,000) (6,000)

Free cash flow to equity (6,633) 344 628 1,336 2,087

Net acquisitions & disposals 12 517 (40) (40) (40)

Dividends paid (949) (771) (345) (227) (540)

Non recurring cash flows 2 8 0 0 0

Net cash flow (7,568) 98 243 1,069 1,507

Equity finance 0 0 0 0 0

Debt finance 4,673 (859) 391 (1,695) (1,534)

Movement in cash (2,895) (761) 634 (625) (27)

Per share (IDR)

Recurring cash flow per share 1,047 1,424 1,342 1,338 1,653

FCF to equity per share (1,221) 63.26 116 246 384

Balance Sheet (IDRb)Year Ending Dec 2009A 2010A 2011E 2012E 2013E

Working capital assets 4,304 4,084 4,377 4,574 5,727

Working capital liabilities (8,787) (7,667) (7,598) (7,862) (8,120)

Net working capital (4,484) (3,583) (3,221) (3,288) (2,394)

Tangible fixed assets 44,576 43,682 43,471 42,610 41,682

Operating invested capital 40,093 40,099 40,250 39,322 39,288

Goodwill 1,580 1,374 1,414 1,454 1,494

Other intangible assets 0 0 0 0 0

Investments 67 46 46 46 46

Other assets 1,679 1,557 1,624 1,694 1,768

Invested capital 43,418 43,076 43,334 42,516 42,596

Cash & equivalents (2,836) (2,075) (2,710) (2,084) (2,057)

Short term debt 4,281 4,280 4,280 4,280 4,280

Long term debt * 21,193 19,775 20,166 18,472 16,937

Net debt 22,638 21,980 21,737 20,668 19,161

Deferred tax 1,535 1,772 1,772 1,772 1,772

Other liabilities 956 1,088 1,305 961 1,611

Total equity 17,958 17,851 18,057 18,575 19,436

Minority interests 331 386 463 540 616


* includes convertibles and preferred stock which i s being treated as debt

Per share (IDR)

Book value per share 3,305 3,285 3,323 3,418 3,577

Tangible book value per share 3,014 3,032 3,063 3,151 3,302

Financial strength

Net debt/equity (%) 123.8 120.5 117.4 108.1 95.6Net debt/total assets (%) 41.1 41.6 40.5 39.4 36.3

Current ratio (x) 0.5 0.5 0.6 0.5 0.6

CF interest cover (x) 3.3 4.2 4.3 4.6 5.3

Valuation 2009A 2010A 2011E 2012E 2013E

Recurring P/E (x) * 21.5 32.1 32.6 25.4 15.3

Recurring P/E @ target price (x) * 25.1 37.4 38.0 29.6 17.8

Reported P/E (x) 17.6 40.8 64.0 25.4 15.3

Dividend yield (%) 2.8 1.2 0.8 2.0 3.3

P/CF (x) 4.6 3.4 3.6 3.6 2.9

P/FCF (x) (4.0) 76.7 42.0 19.7 12.6

Price/book (x) 1.5 1.5 1.5 1.4 1.4

Price/tangible book (x) 1.6 1.6 1.6 1.5 1.5

EV/EBITDA (x) ** 5.1 5.2 5.0 4.6 4.2

EV/EBITDA @ target price (x) ** 5.6 5.6 5.4 5.1 4.6

EV/invested capital (x) 1.1 1.1 1.1 1.1 1.1

* Pre exceptional, pre-goodwill and fully diluted ** EBITDA includes associate income and recurring non-operating income

Sources: Indosat; BNP Paribas estimates

Net gearing to decline as

positive FCF accelerates

Based on a 50% ratio

payout

Management capex

guidance is IDR5.8t-6.5t.


5/11



Financial statementsTelkom Indonesia


Revenue 67,678 68,629 70,546 73,323 77,535




Operating costs (30,915) (31,527) (34,065) (35,076) (36,435)


Depreciation (13,975) (14,611) (13,987) (14,426) (14,750)

Goodwill amortisation 0 0 0 0 0

Operating EBIT 22,788 22,491 22,493 23,821 26,350

Net financing costs (1,634) (1,507) (1,404) (1,288) (999)

Associates (30) (14) (14) (14) (14)

Recurring non operating income 350 403 403 403 403

Non recurring items 973 43 0 0 0

Profit before tax 22,447 21,416 21,478 22,922 25,740

Tax (6,404) (5,546) (5,369) (5,730) (6,435)

Profit after tax 16,043 15,870 16,108 17,191 19,305

Minority interests (4,644) (4,333) (4,432) (4,807) (5,469)


Reported net profit 11,399 11,537 11,676 12,385 13,836

Non recurring items & goodwill (net) (701) (32) 0 0 0

Recurring net profit 10,698 11,505 11,676 12,385 13,836

Per share (IDR)

Recurring EPS * 544 585 594 630 703

Reported EPS 580 587 594 630 703

DPS 288 323 326 378 422

Growth

Revenue (%) 5.5 1.4 2.8 3.9 5.7

Operating EBITDA (%) 5.7 0.9 (1.7) 4.8 7.5

Operating EBIT (%) 1.6 (1.3) 0.0 5.9 10 .6Recurring EPS (%) (9.0) 7.5 1.5 6.1 11.7

Reported EPS (%) 7.2 1.2 1.2 6.1 11.7





Net margin (%) 15.8 16.8 16.6 16.9 17.8



Interest cover (x) 14.1 15.2 16.3 18.8 26.8


Debtor days 20.3 22.2 22.8 22.8 22.8


Operating ROIC - WACC (%) 13.6 11.9 10.9 11.7 13.9

ROIC (%) 24.5 23.3 22.3 23.1 25.1

ROIC - WACC (%) 11.9 10.6 9.6 10.4 12.4

ROE (%) 29.2 27.6 25.4 25.5 26.4

ROA (%) 17.5 17.2 17.0 17.6 19.1



Fixed Lines (incld Flexi SMS) 14,823 13,373 11,993 11,308 10,807

Cellular 44,443 45,567 47,834 50,361 54,028

KSO (Joint Operation Schemes) 0 0 0 0 0

Interconnection 1,339 1,077 862 862 862

Network 1,218 1,058 1,212 1,349 1,464

Data, Internet & IT (less Flexi SMS + Telkomsel 4,592 5,593 6,586 7,282 8,105

Rev sharing arrangements 0 0 0 0 0

Other telco servs 1,263 1,961 2,059 2,162 2,270

Sources: Telkom Indonesia; BNP Paribas estimates

Faster growth due to higher

mobile data growth and

less intense market

competition

Improvement due to less

intense price pressure in

the mobile market and cost

reduction in the fixed-line

business

Higher due to IDR5t share

buyback and improvement

in payout ratio.


6/11



Financial statementsTelkom Indonesia



Depreciation 13,975 14,611 13,987 14,426 14,750

Associates & minorities 4,674 4,347 4,445 4,820 5,483

Other non-cash items 2,372 2,807 (1,061) 929 (850)


Change in working capital (1,907) (5,511) (342) (2,332) (553)

Capex - maintenance (20,479) (14,952) (14,000) (14,000) (13,500)Capex - new investment 0 0 0 0 0

Free cash flow to equity 9,332 12,807 14,707 16,229 19,166

Net acquisitions & disposals (1,264) (935) (700) (700) (700)

Dividends paid (6,365) (5,418) (6,422) (7,431) (8,301)

Non recurring cash flows (86) (631) (95) (95) (95)

Net cash flow 1,618 5,823 7,490 8,003 10,070

Equity finance 0 0 0 0 0

Debt finance (384) (4,402) (5,970) (7,603) (8,586)

Movement in cash 1,234 1,421 1,520 400 1,484

Per share (IDR)

Recurring cash flow per share 1,613 1,691 1,477 1,655 1,689

FCF to equity per share 474 651 748 825 974



Working capital liabilities (18,639) (14,358) (14,435) (13,248) (13 ,654)




Goodwill 2,428 1,785 1,958 2,131 2,304



Other assets 2,525 3,411 3,421 3,433 3,445


Cash & equivalents (7,805) (9,120) (10,640) (11,039) (12,524)

Short term debt 8,078 6,115 6,115 6,115 6,115

Long term debt * 14,566 16,656 16,147 15,089 10,589

Net debt 14,839 13,651 11,622 10,165 4,180

Deferred tax 3,343 4,074 4,074 4,074 4,074

Other liabilities 3,010 2,141 1,094 2,493 2,139

Total equity 38,990 44,419 47,673 49,627 55,161

Minority interests 10,933 11,996 12,882 13,603 14,424



Per share (IDR)



Financial strength


Current ratio (x) 0.6 0.9 1.0 1.1 1.2


Valuation 2009A 2010A 2011E 2012E 2013E

Recurring P/E (x) * 13.1 12.2 12.0 11.4 10.2


Reported P/E (x) 12.3 12.2 12.0 11.4 10.2

Dividend yield (%) 4.0 4.5 4.6 5.3 5.9

P/CF (x) 4.4 4.2 4.8 4.3 4.2

P/FCF (x) 15.1 11.0 9.6 8.7 7.3

Price/book (x) 3.6 3.2 3.0 2.8 2.5


EV/EBITDA (x) ** 4.5 4.4 4.5 4.3 3.9




Sources: Telkom Indonesia; BNP Paribas estimates

Management guides for

IDR9.5-10.5t capex. at

Telkomsel

Relatively low gearing vs

regional peers we cover

Based on a 60% payout.


7/11



Financial statementsXL Axiata


Revenue 13,880 17,637 18,952 20,473 21,957




Operating costs (7,675) (8,350) (9,265) (10,127) (10,774)


Depreciation (3,741) (4,122) (4,763) (5,214) (5,593)

Goodwill amortisation 0 0 0 0 0

Operating EBIT 2,464 5,164 4,924 5,132 5,590

Net financing costs (1,310) (1,129) (814) (761) (685)

Associates 0 0 0 0 0

Recurring non operating income 0 0 0 0 0

Non recurring items 1,210 (167) 0 0 0

Profit before tax 2,363 3,868 4,110 4,371 4,905

Tax (654) (977) (1,027) (1,093) (1,226)

Profit after tax 1,709 2,891 3,082 3,279 3,679



Reported net profit 1,709 2,891 3,082 3,279 3,679

Non recurring items & goodwill (net) (346) 144 0 0 0

Recurring net profit 1,363 3,035 3,082 3 ,279 3,679

Per share (IDR)

Recurring EPS * 182 357 362 385 432

Reported EPS 228 340 362 385 432

DPS 0.00 107 145 193 259

Growth

Revenue (%) 14.2 27.1 7.5 8.0 7.2

Operating EBITDA (%) 20.9 49.7 4.3 6.8 8.1

Operating EBIT (%) 8.1 109.6 (4.7) 4.2 8.9Recurring EPS (%) 269.9 96.5 1.6 6.4 12.2

Reported EPS (%) (10,782.1) 49.3 6.6 6.4 12.2





Net margin (%) 9.8 17.2 16.3 16.0 16.8



Interest cover (x) 1.9 4.6 6.1 6.7 8.2


Debtor days 16.8 9.1 9.1 9.1 9.1


Operating ROIC - WACC (%) - - - - -

ROIC (%) 7.8 16.5 15.7 15.6 16.5

ROIC - WACC (%) - - - - -

ROE (%) 20.8 29.6 24.1 22.0 21.7

ROA (%) 8.2 14.2 13.1 12.9 13.5



Voice 7,064 8,457 8,037 8,207 8,481

SMS 2,703 3,477 3,925 4,176 4,449

Data, VAS & Others 1,259 2,332 3,353 4,256 5,028

Intercon & Roaming 1,551 1,727 1,737 1,823 1,898

Others mobile 194 158 158 158 158

Other telco services 1,109 1,487 1,742 1,853 1,945

Sources: XL Axiata; BNP Paribas estimates

Margins to stay healthy at

above 50%

Decline due to enlarged

shareholders’ fund as our

payout ratio assumptions

are conservative

Driven by data and VAS

revenue growth.


8/11



Financial statementsXL Axiata

Sources: XL Axiata; BNP Paribas estimates



Depreciation 3,741 4,122 4,763 5,214 5,593

Associates & minorities 0 0 0 0 0

Other non-cash items 2,709 2,187 (64) 1 ,597 (138)


Change in working capital (95) (550) 878 (836) 823

Capex - maintenance (5,283) (4,848) (6,000) (6,000) (6,000)Capex - new investment 0 0 0 0 0

Free cash flow to equity 2,436 3,947 2,659 3,253 3,957

Net acquisitions & disposals 159 (209) 0 (700) 0

Dividends paid 0 0 (911) (1,233) (1,639)

Non recurring cash flows 0 0 0 0 0

Net cash flow 2,595 3,738 1,749 1,320 2,318

Equity finance 2,786 0 0 0 0

Debt finance (5,797) (4,119) (1,245) (1,203) (1,651)

Movement in cash (416) (381) 504 117 666

Per share (IDR)

Recurring cash flow per share 1,040 1,098 915 1,186 1,074

FCF to equity per share 324 464 313 382 465



Working capital liabilities (3,533) (3,586) (4,440) (3,976) (4,731)




Goodwill 0 0 0 0 0



Other assets 1,644 1,793 1,927 2,082 2,232


Cash & equivalents (748) (366) (870) (987) (1,654)

Short term debt 2,475 977 977 977 977

Long term debt * 10,988 9,202 8,702 8,206 7,206

Net debt 12,716 9,813 8,809 8,196 6,529

Deferred tax 0 0 0 0 0

Other liabilities 1,580 1,771 1,096 1,440 802

Total equity 8,803 11,715 13,887 15,932 17,972




Per share (IDR)



Financial strength


Current ratio (x) 0.3 0.5 0.5 0.6 0.7


Valuation 2009A 2010A 2011E 2012E 2013E

Recurring P/E (x) * 28.4 14.4 14.2 13.4 11.9


Reported P/E (x) 22.6 15.2 14.2 13.4 11.9

Dividend yield (%) 0.0 2.1 2.8 3.7 5.0

P/CF (x) 4.9 4.7 5.6 4.3 4.8

P/FCF (x) 15.9 11.1 16.5 13.5 11.1

Price/book (x) 5.0 3.7 3.2 2.8 2.4


EV/EBITDA (x) ** 8.9 5.9 5.5 5.1 4.6




Higher capex as XL

accelerates the roll-out of

its data network

Management guides for

progressive increase in

payout ratio

Net debt declines as we

have assumed XL’s annual

dividends are lower than

FCF


9/11



History of change in investment rating and/or target price

Indosat (ISAT IJ)

Choong Chen Foong started covering this stock from 02-Nov-2009Price and TP are in local currency

Valuation and risks: Key downside risk to our DCF-based TP is a failure to compete with rivals and a subsequent loss of market share

Source: Bloomberg, BNP Paribas

Telkom Indonesia (TLKM IJ)

Choong Chen Foong started covering this stock from 07-Sep-2009Price and TP are in local currency

Valuation and risks: Key downside risks to our DCF-based TP for Telkom are: a) aggressive price cutting by competitors may result in loss of market share for Telkomsel orreduced margins; and b) Telkom overpays for acquisitions


XL Axiata (EXCL IJ)

Choong Chen Foong started covering this stock from 10-May-2011Price and TP are in local currency

Valuation and risks: Risks to our DCF-based TP are intense market competition and regulatory risks.


Date Reco TP

18-Oct-07 REDUCE 6,200.00

1-Nov-09 BUY 6,350.00

3-Nov-10 HOLD 5,800.00

28-Jul-11 BUY 6,600.00

3,555

4,555

5,555

6,5557,555

8,555

9,555

10,555

Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11

(IDR) Indosat Target Price

Date Reco TP

18-Oct-07 BUY 11,750.00

4,500

5,500

6,500

7,500

8,500

9,500

10,500

11,500

12,500


(IDR) Telkom Indonesia Target Price

Date Reco TP

9-May-11 BUY 7,150.00

729.00

1,729.00

2,729.00

3,729.00

4,729.00

5,729.00

6,729.00

7,729.00


(IDR) XL Axiata Target Price


10/11



Disclaimers and Disclosures Appendix

ANALYST(S) CERTIFICATION

Foong Choong Chen, BNP Paribas Capital (Malaysia) Sdn Bhd, +603 2179 6238, [email protected].

The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflectthe personal view of the analyst(s) with regard to any and all of the subject securities, companies, or issuers mentioned in this report; (ii) no part of thecompensation of the analyst(s) was, is , or will be, directly or indirectly, relate to the specific recommendation or views expressed herein; and (iii) is notaware of any other actual or material conflicts of interest concerning any of the subject securities companies, or issuers referenced herein as of the time ofthis certification.

Analysts mentioned in this disclaimer are employed by non-US affiliate of BNP Paribas Securities Corp., and is not registered/ qualified pursuant to NYSE

and/ or FINRA regulations.

GENERAL DISCLAIMER This report was produced by BNP Paribas Capital (Malaysia) Sdn Bhd, a member company of the BNP Paribas Group. "BNP Paribas” is the marketing name for the global banking and markets business of BNP Paribas Group1. This report is for the use of intended recipients only and may not be reproduced (inwhole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to bebound by the terms and limitations set forth herein.

BNP Paribas analysts prudently perform analysis and create quantitative models and estimates derived from their own review of publicly available datawithout any assistance from any represented company. BNP Paribas analyst estimates and models reflect the analysts’ current judgment only; they areneither all-inclusive nor can they be guaranteed. “The analysts’ analysis and models are subject to change based on various other factors. Valuations arebased on internal quantitative models and qualitative interpretation. No representation or warranty, express or implied, is made that such information oranalysis is accurate, complete or verified and it should not be relied upon as such.

Analysts' compensation is not linked to investment banking or capital markets transactions performed by BNP Paribas or the profitability or revenues ofparticular trading desks.

BNP Paribas analysts may participate in company events such as site visits and are prohibited from accepting payment by the company of associatedexpenses unless pre-approved by authorized members of Research management.

This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs ofindividual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in anytrading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or otherinvestments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report.Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without therecipient’s own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in thisreport may not be available for sale in certain jurisdictions.

BNP Paribas is not aware of any other actual or material conflicts of interest concerning any of the subject securities and companies referenced herein as ofthe time of publication of the research report.

This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whose businessinvolves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a subsidiary of BNP Paribas, isregulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities and providing automated trading services.

This report is being distributed in Japan by BNP Paribas Securities (Japan) Limited which is registered as a Financial Instruments Business Operator to andregulated by Financial Services Agency, The Japanese Government.

This report is being distributed in the United Kingdom by BNP Paribas London Branch to persons who are not private customers as defined under U.K.securities regulations. BNP Paribas London Branch, a branch of BNP Paribas, is regulated by the Financial Services Authority for the conduct of its designatedinvestment business in the U.K. This report may be distributed in the United States by BNP PARIBAS SECURITIES ASIA or by BNP Paribas Securities Corp.

This report may be distributed in the United States only to “major institutional investors” (as such term is defined in Rule 15a-6 under the SecuritiesExchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major institutional investor. Where this report hasbeen distributed in the United States it will have been reviewed by a FINRA S16 qualified registered supervisory analyst or a S24 qualified and authorizedperson, in accordance with FINRA requirements concerning third party affiliated research. All U.S. institutional investors receiving this report should effecttransactions in securities discussed in the report through BNP Paribas Securities Corp. BNP Paribas Securities Corp. is a member of the New York StockExchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. Reproduction, distribution or publication of thisreport in any other places or to persons to whom such distribution or publication is not permitted under the applicable laws or regulations of such places isstrictly prohibited.

This report is distributed in Singapore by BNP Paribas Securities (Singapore) Limited ("BNPPSSL") and may be distributed in Singapore only to an accreditedinvestor or an expert investor, each as defined under the Financial Advisers Regulations ("FAR") and the Securities and Futures Act (Chapter 289) ofSingapore, as amended from time to time. In relation to the distribution to such categories of investors, BNPPSSL and its representatives are exempted underRegulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore, regarding the disclosure of certain interests in, orcertain interests in the acquisition or disposal of, securities referred to in this report.

This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street SydneyNSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no. 238043 andtherefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. By accepting thisdocument you agree to be bound by the foregoing limitations, and acknowledge that information and opinions in this document relate to financial productsor financial services which are delivered solely to wholesale clients (in terms of the Corporations Act 2001, sections 761G and 761GA; CorporationsRegulations 2001, division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the Corporations Act 2001).

To our readers in Taiwan: Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co., Ltd. Such information is for your reference only. The reader should independently evaluate the investment risks and is solely responsible for their investment decision. Information onsecurities that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in suchsecurities. BNP Paribas Securities (Taiwan) Co., Ltd. may not execute transactions for clients in these securities. This publication may not be distributed tothe public media or quoted or used by the public media without the express written consent of BNP Paribas.

The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into whose possessionthis report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by the foregoinginstructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in anylocality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on aparticular stock, please contact the relevant BNP Paribas research team or the author(s) of this report. 1 No portion of this report was prepared by BNP Paribas Securities Corp. personnel, and references to “BNP Paribas” in this General Disclaimer section and in the immediately following Important Disclosures section refer to (BNP Paribas Capital (Malaysia) Sdn Bhd) only.


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IMPORTANT DISCLOSURES

The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in thisreport:

Company Disclosure (as applicable)

- -

BNP Paribas represents that:

1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees.

2. It had an investment banking relationship with this company in the last 12 months.

3. It received compensation for investment banking services from this company in the last 12 months.

4. It beneficially owns 1% or more or the market capitalization of this company.

5. It makes a market in securities issued by this company.

6. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position

in securities issued by this company or derivatives thereof.

7. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company.

Additional Disclosures

Within the next three months, BNP Paribas may receive or seek compensation in connection with an investment banking relationship with one or more of

the companies referenced herein.

Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in

our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this

note or your BNP Paribas representative.

All share prices are as at market close on 18 October 2011 unless otherwise stated.

RECOMMENDATION STRUCTURE

Stock Ratings

Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price.

BUY (B). The upside is 10% or more.

HOLD (H). The upside or downside is less than 10%.

REDUCE (R). The downside is 10% or more.Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause atemporary mismatch between upside/downside for a stock based on market price and the formal recommendation.

* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.

Industry Recommendations

Improving ( ): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months.

Neutral ( ): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months.

Deteriorating ( ): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months.

Country (Strategy) Recommendations

Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determinemarket recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity.

Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine marketrecommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returnsrelative to the market cost of equity.

Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determinemarket recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and indexreturns relative to the market cost of equity.

RATING DISTRIBUTION (as at 19 October 2011)

Total BNP Paribas coverage universe 557 Investment Banking Relationship (%)

Buy 344 Buy 4.60

Hold 158 Hold 2.50

Reduce 54 Reduce 1.80

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report.

© 2011 BNP Paribas Group

bnp - indonesia telecoms 2011

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