EXCL AN EVIDENCE OF FIT BUSINESS STRATEGY - BNI Sekuritas

Investment Highlights:
􀂄 Continues To Note Positive Results
􀂄 All Figures Surpassed Our Expectation
􀂄 Some Of The Key Growth Drivers
􀂄 Shifting Revenue Composition
􀂄 The Potential Of Continuing Growth In Non-Voice Business
􀂄 Improving Margin

Our previous report in the 1H10 highlighted that EXCL 1H10 result could become as a clearer future growth signal which it had been confirmed by the company's FY10 result. On the back of the strategic initiatives and an effort through the execution of various strategies not only impacting on EXCL's FY10 revenue but also increasing the value creation of the stockholders.

In that period, company's total revenues grew by 27.07% YoY to IDR 17.63tn (FY10) compared to the same period of last year amounting IDR 13.88tn (FY09). Out of the total amount voice revenue remained to become the highest revenue contribution (47.95%) or equal to around IDR 8.45tn (FY10). The second meaningful contribution was noted by company's sms revenue, which in the same period it posted a growth of 28.63% to IDR 3.47tn (FY10) and gave around 19.71% to EXCL's total revenue, or higher compared to last year contribution of 19.47% (FY09).

Various promotional tariff plans and tariff optimization as well as a number of continuing sms promotion program last year had helped company's total cellular revenue up by 26.47% from IDR 12.77tn (FY09) to IDR 16.15tn (FY10) . The hasty development of social networking applications such as facebook and others instant messaging services were also becoming a positive sentiment that drove the Data and VAS contribution increased by 4.15%, from around 9.07% (FY09) to 13.22% (FY10) or equal to approximately IDR 2.33tn (FY10) versus IDR 1.25tn (FY09) or jumped by 85.23% YoY. The latest significant sales drivers were coming from company's infrastructure businesses. Consists of leased lines, leased towers, national roaming and internet service provider; the total infrastructure income posted 34.08% higher from IDR 1.10tn (FY09) to IDR 1.48tn (FY10) which equal to a contribution of 8.43% (FY10) to EXCL's total consolidated revenue, or increased from around 7.99% (FY09).

We forecast that the company is potentially to record at least a low double digit growth by the end of this year to IDR 19.56tn (FY11F) or in line with the consensus
expectation of IDR 19.77tn (FY11F) with a growing bottom line of around 20.16% to IDR 3.68tn (FY11F) or 4.1% below average net profit projection of IDR 3.84tn (FY11F). With such historical growth (Net Revenue CAGR 22.99% and Net Profit CAGR 23.03%) we deem that EXCL's shares should be traded at premium around P/E 17,0x higher than its peers (TLKM) with 13,63x P/E multiple. Over the counter EXCL's is traded at P/E 17,21x or below the industry average P/E of 24,35x. We maintain our BUY recommendation with 12 months target price of around IDR 6.700 per share or equal to P/E 15,10x (FY11F) or equivalent compared to the consensus FY11F industry P/E of around 15,08x and approximately 15.51% of upside potential using the closing price of IDR 5.800 per share as of April 13th 2011.