Date: October 16, 2024
Broker: UOB Kay Hian
Company Overview
Indosat (ISAT IJ) is the second-largest telecommunications operator in Indonesia, serving nearly 100 million subscribers across the country. The company operates in the Communication Services sector and is listed on the Bloomberg ticker ISAT IJ. With a market capitalization of IDR 80,304.5 billion (USD 5,151.4 million), Indosat has a strong presence in Indonesia’s telecom industry. Major shareholders include Ooredoo Hutchison Asia Pte. Ltd. (65.6%) and Perusahaan Pengelola Aset (9.6%).
Stock Data
- Share Price: IDR 2,490
- Target Price: IDR 3,100
- Upside: 24.5%
- 52-week high/low: IDR 2,163/IDR 3,063
- Shares issued: 8,062.7 million
- 3-month avg daily turnover: USD 3.3 million
Key Financials (in IDR billion)
| Year |
2023 |
2024F |
2025F |
2026F |
| Net Turnover |
51,229 |
54,926 |
58,042 |
61,220 |
| EBITDA |
23,938 |
26,193 |
27,319 |
28,489 |
| Operating Profit |
9,317 |
10,915 |
12,195 |
12,917 |
| Net Profit (Adjusted) |
3,561 |
4,726 |
5,140 |
5,546 |
Earnings Per Share (EPS) is expected to grow from IDR 441.7 in 2023 to IDR 637.5 by 2025, with the company trading at a PE ratio of 5.6x for FY2023 and 3.9x for FY2025.
Revenue Growth Projections
Indosat’s revenue is projected to grow at a Compound Annual Growth Rate (CAGR) of 5.7% from 2024 to 2026. EBITDA is forecasted to rise by 4.3% during the same period. The company expects strong growth in its non-mobile segment, aiming for this segment to contribute 25% of total revenue by 2028.
Core Earnings Growth
Indosat’s core earnings for 2024 are anticipated to increase by 33% year-on-year (yoy), driven by several factors:
- Revenue growth in the non-mobile segment.
- A 20% yoy growth in home broadband (HiFi) subscribers in 2025.
- The successful launch of its GPU-as-a-Service (GPUaaS) product, aimed at AI and high-performance computing.
Key Business Developments
1. GPU-as-a-Service (GPUaaS)
Indosat’s subsidiary, Aplikanusa Lintasarta, launched a high-performance GPU server service, GPU Merdeka, in August 2024. The service uses NVIDIA GPUs and targets enterprise customers. Indosat has prepared 1,000 units of NVIDIA H100 GPUs, aiming to capture demand from industries requiring advanced AI computing.
The GPUaaS market is expected to grow at a 29% CAGR from 2024 to 2029, reaching USD 18.2 billion by 2029. This service is anticipated to significantly contribute to Indosat’s revenue from non-mobile services. Potential long-term contracts with banks and government institutions are being explored, with contracts likely to last 1-3 years.
2. HiFi Broadband Expansion
Indosat’s home broadband service, HiFi, has expanded its coverage to 60 regions across major and secondary cities. Following the acquisition of MNC Play in late 2023, the company aims to increase its subscriber base by 20% in 2025.
3. Price Increases for Data Services
Indosat increased its data pricing by 5% in September 2024, which, combined with seasonally stronger demand during the fourth quarter (Christmas and New Year), is expected to boost performance in the latter part of the year.
Key Risks
The company faces several downside risks:
- Intensifying competition from new and existing telecom operators.
- Macroeconomic challenges that could weaken consumer purchasing power.
- Potential regulatory changes that may negatively affect the industry.
- A longer-than-expected timeline for growing demand in its AI-related services.
Dividend Yield and Valuation
Indosat has a projected dividend yield of 7.2% for 2024 and 12.8% for 2025. The company is currently trading at an EV/EBITDA ratio of 4.4x for 2025, which is below its historical average.
Conclusion
UOB Kay Hian maintains a BUY recommendation on Indosat, with a target price of IDR 3,100, reflecting 24.5% upside potential. The company’s strategic initiatives in AI services and broadband expansion are expected to drive future growth, supported by rising demand in the GPUaaS market.
