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Benny Leo
Benny Leo
*TLKM 1Q20: Net profit -6% YoY on soft revenue; yet in-line with our expectations*
TLKM delivered consolidated net profit of Rp5.9 tn, went down by 5.8% YoY, forming 31% of our forecast which we deem in-line with our estimate. Revenue came in weak at Rp34.2 tn (-1.9% YoY) on the back of slow revenue booking in enterprise business and flattish growth in mobile. EBITDA margins expanded by +450bps to 54.9% driven by the full adoption of IFRS 15 and 16. Despite the accounting changes, we note some hikes in cash costs especially in personnel (+10.2%) on higher employee benefits and in G&A expense (+21.5%) on higher receivable provisioning (+40.5%) that would drag down comparable pre-IFRS EBITDA margins. Finance expenses rose by 22% YoY partially also driven by the IFRS changes. Overall, pre-tax profit dropped by -3.6% to Rp10.9 tn. Minority claims increased by 7.0% YoY, implying a similar growth in Telkomsel, though we understand from SingTel read-through that profit growth was driven chiefly from lower tax rate amid muted top line growth.
*Our take*: Despite recording in-line net profit to ours, we believe it failed to meet Consensus’ demand by forming only 27% of Consensus net profit. We believe further downgrades on Consensus’ expectations are on the card that would put some pressures on the share prices in the short term. Further details operational data would be available upon release, usually a couple of days ahead. We have BUY rating on TLKM with Rp3,900/share TP.