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Telkom

Today, Telekomunikasi Indonesia (TLKM) is decreasing by 1.94%, relatively small compared to the declining of other blue chip members, but that is because TLKM has decline a lot before. As the price is now at 7,600, TLKM has gone down rapidly during last one year, precisely about 22.4% from its peak position at 9,800 which was reached on December 11th, 2009. It is implied that TLKM have gone down quite a lot even before IHSG went down dramatically within the last one week.


Some shares of blue chip, including TKLM, are esteemed too high along with the bull market recently. Even then it has gone down dramatically, but in reality, TKLM at level 7,600 is still expensive if we reflected at its performance in first quarter 10. TLKM nowadays has sold 3.7 times from its equity value. Its annualized PE is also high enough which is 13.5 times.

Well, in fact, those numbers were not odd in the past. As a company who has always earned the net profit above 25% from its equity value (which means the company only need 4 year or less to break even), it is fair if TLKM is esteemed 3 or 4 times from its equity value (PBV 3 – 4 times). However, even with an assumption that the net profit gained by TLKM in the next three quarters of  2010 is  equal to the net profit which they gained at the first quarter, and its equity rises about 10 - 12%, the net profit which will be noted by TLKM only about 22 - 24% from its equity value (ROE 22 – 24%). That mean, TLKM’ today’s performance is not as good as in the past.

In recent time, the performance of TLKM is neither promising nor decreasing. It is true that TLKM noted an increase of net profit around 13.0% at first quarter 2010 compared to the same period of 2009. However, that increase was only caused by the non-operational earnings, which was from the difference in value of Rupiah exchange rate as Rupiah was strengthen against US Dollar. So, considering Rupiah is going down recently (its latest position has already above Rp9,200 per US Dollar) hence TLKM will experience degradation of its net profit in the first half of 2010.

Revenue of TLKM at first quarter 2010 rose 6.2%. If we breakdown the revenue, we will find some interesting facts: TLKM earnings from phone house sector decreased 6.7%, from cellular phone sector increased 3.0%, and from internet service sector went up 24.7%. So, what is interesting about it? Paying attention: TLKM is the only player in the phone house business in Indonesia. Some other telecommunication companies, for example Bakrie Telecom, have also stepped into this business but its scale is still very small if we compare to TLKM. So, as a almost monopolist, how come its earnings from this sector go down? If the reason is that people nowadays use fewer house telephones because they have already had cellular phone, then why TLKM earnings on cellular phone only rises merely 3.0%? The earnings of TLKM in internet service sector goes up big enough about 24.7%. However, internet service business is booming recently, where most of computer consumers (including me) have used the internet, so TLKM income should be bigger than that.

With this condition, TLKM has possibility to decrease again. Moreover, this is happened at the same time with the lowering of JCI. The question is, how low?

The lowest price of TLKM during the last one year was 7,000. Technically, TLKM can go up again after today, but in this situation it is better to not use technical analysis. TLKM could probably get down to until 6,000, and cannot be lower than that. Why not? If TLKM continues to go down until under 6,000, its PE value will touch 10.6 times. Psychologically, it is impossible, because the PE value of all bluchip members have never stood in below 10 times, unless in a crisis like 2008.

Original article was written on May 7, 2010

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