INDOSAT (ISAT): Improving 1Q11 Cellular Revenue +6% Y/Y & -1%Q/Q – reit Buy! - Credit Suisse

ISAT remains #2 largest Cellular Operator with 45,000 Average Subscribers and ARPU Rp29,336 during 1Q11. ISAT 1Q11 Cellular Revenue -1% Q/Q better than EXCL -4% Q/Q, despite seasonal 1Q weakness Q/Q. In-line ISAT 1Q Revenue Rp4,878bn (+3% Y/Y & 22.5% of Consensus 2011) with Net Profit Rp454bn (+63% Y/Y & 34% of Consensus 2011). At Rp5,200- ISAT is trading on 23.6x-13.8x 2011F-12F PER and implied 52% upside to DCF Rp7,900. With the Management guidance remain positive, we reiterate BUY ISAT on turnaround story!

· Colin McCallum (Daily attached): Indosat’s net cellular revenue grew 6.2% YoY into 1Q11, and declined only 0.9% QoQ. In the context of normal weak industry seasonality into 1Q, we view the QoQ result as strong evidence that the recent doubling of promotional peak-hour tariffs has begun to feed through the subscriber base. Maintain OUTPERFORM. Indosat is a CS NJA Focust List stock.

· Costs are also being controlled. Stripping out the Rp116 bn in VSS costs booked in 1Q11, the normalised EBITDA margin rose by 1.0 p.p. YoY to 48.0%. This drove 5.1% YoY growth in consolidated EBITDA. Forex and derivative gains helped drive a sharp QoQ and YoY increase in headline net profit, to Rp454 bn.

· Indosat’s investor presentation guides for 7–11% consolidated revenue growth, 8–12% cellular revenue growth, consolidated EBITDA growth of up to 9% (even after including VSS costs) and cash capex of Rp5.8–6.8 tn. We believe the delivery of financial results in line with the higher end of this guidance range would be a clear positive catalyst for the stock throughout FY11.