The state-owned, semi-privatized Telkom Indonesia (
TLK
,
quote
) is the largest telecommunications company in Indonesia, which
is the world's largest Muslim country, and the fourth most
populous country in the world with nearly 240 million
people. Here are five reasons why your Telkom Indonesia
investment could pay off.
1) Indonesia (
IDX
,
quote
) is looking at 6% GDP growth over the next few years
This makes it a country that is rapidly swelling the ranks of
its middle class -- and their disposable income. This politically
stable economy is driven by manufacturing, construction and
tourism, and is rich in natural resources.
However, more than 90% of mobile users are prepaid customers,
and Seeking Alpha reports that "the only Indonesians who
don't yet have mobile phones are probably those living in the
jungles of Borneo or Papua and don't need them", putting a
cap on future subscriber growth. Combined with declining average
revenue per user, currently Rp 23,238 (US$2.40) per month, the
company needs to be aggressively rolling out the infrastructure
needed to increase data subscriptions from feature phones, as
well as broadband uptake.
2) Telkom Indonesia is aggressively
marketing smartphones and
upgrading infrastructure
The company is upping its Indonesia investment plans, recently
signing a deal with Samsung
(
SSNLF
,
quote
) to spur Indonesian smartphone sales.
"Alistair Johnston, marketing director of Telkomsel, said that
the deal was part of the mobile operator's plan to develop the
firm's device, network and application (DNA) strategy to boost
data traffic on their third generation (3G) broadband network by
getting more Internet-enabled mobile devices equipped with mobile
applications connecting to the network", reports the
Jakarta Post
.
Indonesian internet penetration is still far behind compared
to other countries, which means there's huge growth potential.
Telkom Indonesia is
building out the Indonesia Digital Network
(IDN) until 2015 for broadband internet, pitching the initiative
to Indonesians as a way to bridge the digital divide suffered by
the developing country and significantly boost its GDP.
3) Dividend yield
In the current low interest macro environment, yield is a
crucial component to any investor. Telkom Indonesia is currently
paying out a very respectable 3.43%, although Seeking Alpha
cautions that it generally pays most of its dividends (which
vary) as one payment in June or July, "as its difficult for any
emerging market stock to pay a consistent dividend four times a
year." That said, your Indonesia investment should be pretty
safe, given that any company that pays out a dividend is a
disciplined company with a consistent cash flow.
4) It's a fast growing, well run company with 130
million customers
In August Fitch Ratings affirmed Telkom Indonesia's
Long-Term Foreign- and Local-Currency Issuer Default Ratings
(IDRs), as well as its senior unsecured rating at 'BBB-' with the
outlook as stable. "
Telkom's ratings have significant headroom
given its strong credit metrics" reports Cellular News.
The $14.2 billion company by market cap recorded
record revenue of Rp 56.9 trillion
($5.9 billion) in the third quarter, up 7.6%, while profit
jumped by 19.3% to $1.037 billion, driven largely by increasing
broadband penetration and mobile data subscribers.
5) It's a highly liquid, attractively priced
stock
Telkom Indonesia has an average three month volume of over
300,000 shares, so it's reasonably easy to get into and out of
the position you want. With a price to earnings ratio of 14.2,
and earnings per share of 2.72, this Indonesia investment
compares extremely favorably to American equivalents like AT
& T (
T
,
quote
), whose P/E of 44.24 and EPS of 0.77 looks pretty lame in
comparison.
http://www.telkom-indonesia.com/
