EXCL – right timing - Indopremier

At Rp6,000, EXCL is trading at 15.2 times our estimated FY11 earnings, and 13.3 times FY12 earnings, with our estimated 16% this year’s earnings growth and 14% that of next year. EXCL is now trading about at par with the sector and the market rating. We favor EXCL strategies on Data businesses while EXCL’s current voice tariff position among the big three provides flexibilities to compete to grow the next years. Maintain BUY with target price of Rp7,250/share.

Right Timing
The year 2007 highlighted a new platform telephone operators to compete among, in our view. The year marked with EXCL’s dramatic decrease of voice tariffs and minutes increased followed in the next years. EXCL’s extreme tariff reduction was soon followed by other operators. In terms of total net revenue among operators listed in the BEI, as of 1Q11, EXCL sat on a 17% revenue market share, reflecting an increase from 6% in the year 2006.

Data the new source of growth
With Voice and SMS services growth have matured, Data business is the next growth engine. At present, pricing is the least most important thing to boost growth for Data section. To produce optimal consumers’ experiences, since 2010, EXCL adopts a method to integrate Voice, SMS, and Data in its product offering that ensures Affordability, Relevance, and Ease-of-Use.

Outlook
We estimate high-single-digit revenue growth years ahead with EXCL keeps its objective to offer optimal products and to go “Beyond Affordability” for the next phases.