ISAT 2010 result - operationals in line but net is impacted by other items - CLSA

Stock : Indosat (ISAT IJ)
Date : March 1, 2010
Rec : Non-rated (we will initiate coverage soon). Target price: N/A; Upside: N/A. 3M share price performance 28% (relative to market)

Topic: 2010 full year result - short of consensus expectations due to other items

2010 unaudited result highlights - operationals are in line but net profits are impacted by other items, from Jessica Irene/Dee Senaratne

Details:
Revenues are in line with consensus, up 5% YoY. Revenue growth is primarily driven by a 34% increase in the number of subscribers from 33mn to 44mn.

4Q10 however show a less encouraging trend with revenues down 3% YoY and 4% QoQ. This highlights the intensity of competition in the Indonesian telecommunication industry.

EBITDA is spot on with consensus’ numbers, implying a 10% YoY growth. EBITDA margin expanded to 50% in 4Q10 due to a series of cost efficiency programs versus 48-49% the previous quarters.

Net income fell short of consensus expectations, making up only 70% of consensus forecasts. Net income decreased by 57% YoY on the back of lower forex gains, higher interest expenses, and higher depreciation and amortization expenses. No further details yet as per company’s announcement.

Capex to sales ratio decreased from 57% to 33%, or in absolute terms down 39% YoY. Capex to sales ratio fell as low as 25% in 3Q10 but came back up to 44% levels in 4Q10. 4Q10 capex is up 77% YoY and 71% QoQ.