EXCL:Won't repeat 2010, remain decent - Mandiri Sekuritas

As expected, 2010 was a remarkable year for EXCL. They managed to outperform other competitors with double-digit growth in all revenue segments. Growing revenue to Rp17.6tn (+27.4% yoy), coupled with efficient cost management and newtork optimization, ascend earnings to Rp2.9tn (+69.1% yoy), inline with consensus, slightly above ours. For 2011, we still view EXCL’s outlook positively though the result may not be as good as 2010 due to stiffer industrial competition and high benchmark defined in 2010. Amid teeming market, we believe subscribers still has room to penetrate for EXCL, while avoiding RPM deterioration. Along with attractive valuation stance, we maintain our Buy recommendation on EXCL at TP of Rp7,300.

Another striking promo package. EXCL continued to innovate their product through intensive ‘Rp 0’ promo in late 2010 which maximized voice usage especially during peak hours. Consequently, revenue per minute (RPM) declined in 4Q10 to Rp97 from 3Q of Rp107. Residual effect from Ramadhan promo, seen in high 3Q RPM, also contributed to such drop. However, on yearly basis RPM still grew by 16% yoy, which could mean their promotional effort were actually able to generate higher revenue.

Subscribers remain robust amid congested market..Although cellular industry is facing congestive fettle, EXCL keep growing its subsriber base, which is now situated at 40.4mn (+29% yoy, +5% qoq). We appreciate EXCL, which proactively managed its customer loyalty and control churn rate through intensive customer loyalty management, while at the same time maintain value contribution.

Less favorable year, but remain positive. As market penetration is already at congested level and 2010 already set high benchmark, this year may bring lower growth than last year for EXCL. Nonetheless, such expectation we believe is still a fine outcome for EXCL anyhow. Our FY11F forecast suggests that EXCL’s revenue may spring up by 17% yoy. In addition, we still see EXCL potential in replacing ISAT’s 2nd place in terms of subscribers base this year.

Alluring valuation, no other than maintaining Buy. In our view, all of fine results on EXCL aforementioned are also translated into their appealing valuation, which currently stands at PER 11F 11.3x and P/BV 11F 2.8x (WACC: 11.9%; TG: 2%). Therefore, we still vindicate our Buy call on the counter with TP of Rp7,300/share.