XL by JP MORGAN

Asia Pacific Equity Research
27 July 2010
Initiation
Overweight
Excelcomindo EXCL.JK, EXCL IJ
Price: Rp4,150
Street EPS targets up 114% YTD; we see 51% more
Price Target: Rp5,600
coming
• We initiate coverage of Excelcomindo with an Overweight rating Indonesia

and a December 2010 price target of Rp5,600 (target return based on Wireless Services
51% upside to the Street 2010 EPS forecasts coupled with 16% multiple James R. Sullivan, CFA
AC
contraction ). Excelcom (EXCL) is our preferred regional exposure to (65) 6882-2374

the micro and macro themes driving the sector. The ratio of target price james.r.sullivan@jpmorgan.com
to our estimated worst case price is 1.0x for Excelcom (35% upside vs. J.P. Morgan Securities Singapore Private
Limited
34% downside).
Vishesh Gupta
• The Street is targeting 20% YoY revenue growth for EXCL, despite (852) 2800-8574
the fact that it posted 41% in 1Q10. ARPM has stabilized as EXCL vishesh.x.gupta@jpmorgan.com
and TLKM increase pricing, and the regulator is focused on increasing J.P. Morgan Securities (Asia Pacific) Limited
quality of service rather then cutting prices. We forecast 36% YoY

Price Performance
revenue growth, 13% ahead of consensus.
4,000
• The Street is forecasting 47.5% EBITDA margins, despite 52% Rp 2,500
posted in 1Q10 and the five consecutive quarters of margin expansion.
1,000
We forecast 51.8% margins, driving our EBITDA target 23.5% higher
Jul-09 Oct-09 Jan-10 Apr-10 Jul-10
than the consensus. The Street’s EPS targets have already been raised by
EXCL.JK share price (Rp)
114% YTD, and we believe there is 51% more to come. JCI (rebased)
YTD 1m 3m 12m
• Excelcomindo has driven massive change in the Indonesian wireless Abs 118.4% 1.8% 20.3% 176.7%
space, and is poised to take advantage of the new industry stability. Rel 101.0% -0.5% 17.6% 139.8%
Management has executed a Bharti-esque strategy very well; we expect
this execution to continue.
• Potential negative risks to our price target include destructive price-

cutting by Indosat, significant consolidation of the second-tier operators
in a way that would increase overall industry competition, and in the
longer term, margin compression from wireless data.
• This report is a companion to our report “TIP Telcos: Waiting for

Growth, not Godot”, published July 27, 2010.
Excelcom earnings and valuation summary (Reuters: EXCL.JK; Bloomberg: EXCL IJ)
Rp Bn, YE Dec FY09 FY10E FY11E FY12E Stock Data ADR Data
Sales 13,706 18,690 21,576 24,628 52-wk range(Rp) 1120-3825 Reuters NA
EBITDA 6,205 9,687 11,043 12,486 Market cap(Rp bn) 30,203 Bloomberg NA
% Y/Y 20.9% 56.1% 14.0% 13.1% Market cap(US$ mn) 3,254 52-wk range(US$) NA
Adj Profit 1,364 3,167 4,267 5,408 Shares outstanding( mn) 8,508 Ratio NA
Adj EPS (Rp) 189 372 501 636 Free float (%) 0.2% ADR premium (%) NA
% Y/Y 285.8% 96.7% 34.7% 26.8% 3-mth avg trading value: Price NA
DPS (Rp) 0.0 0.0 100.3 127.1 Local (US$ mn) 1.379 Date of price NA
EV/EBITDA (x) 3.6 4.6 3.7 3.0 ADR (US$ mn) NA
Adj P/E(x) 7.3 11.2 8.3 6.5 Index (JCI) 2,694
Div yield (%) 0.0 0.0 2.4 3.1 Forex (Rp/US$1) 9,283
FCF to market cap (%) 20.3 14.0 16.0 19.8 Date of price 5/26/2010
Source: Company reports, Bloomberg, and J.P. Morgan estimates.
See page 20 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
James R. Sullivan, CFA Asia Pacific Equity Research
(65) 6882-2374 27 July 2010
james.r.sullivan@jpmorgan.com
Company Description P&L sensitivity metrics EBITDA EPS

2010E impact (%) impact (%)
PT Excelcomindo Pratama Tbk, also Blended cellular ARPU (Rp000/mo) 39
known as XL, is an Indonesia-based Impact of each 5% 4.3% 9.5%
mobile telecommunications services
Total subs (mn) 37.4
operator. XL offers data communication,
broadband Internet, mobile Impact of each 5% 2.3% 5.2%
communication and 3G services over EBITDA margin (%) 51.8%
GSM 900, GSM 1800 networks. Impact of each 1% 2.0% 4.4%
Capex (Rp bn) 4,740
Impact of each 5% NA 0.5%
Source: J.P. Morgan estimates
Price target methodology

Revenue contribution chart (2010E) Our PT is based on a sum of 1) potential upside/ (downside) to consensus
Non
EPS vs. J.P. Morgan EPS estimates and 2) our estimated multiple
service expansion/(contraction) based on peak P/E multiple. Our peak P/E
Cellular-
6% multiple is based on the stock’s historical trading range and expected
non voice future business changes.
33%
Cellular-
voice
Interconne 51%
ct & Price target and valuation analysis 2010E 2011E
roaming Current consensus P/E (a) 16.8 13.2
10%
Peak P/E (b) 14.0 14.0

Upside/ (Downside) to peak multiple (b/a-1=e) -16.4% 5.9%
JPM vs. consensus EPS (d) 51.3% 59.7%
Source: J.P. Morgan estimates
Cumulative upside to current price (e+d) 34.8% 65.6%
J.P. Morgan vs. consensus J.P. Morgan Dec-10 target price (Rp/sh 5,600
Rp bn J. P. Morgan Consensus
FY10E-Rev 18,690 16,508 If our price target were achieved, Excel would be trading at a 2010E/11E
FY11E-Rev 21,576 18,743 P/E of 15.0x/11.2x and EV/EBITDA of 5.9x/4.8x. At our price target
FY10E-EBITDA 9,687 7,841 Excelcom would provide a 2010E/11E dividend yield of 0.0%/1.8%.
FY11E-EBITDA 11,043 8,856 Destructive price cutting by Indosat, significant consolidation increasing
FY10E-Net inc. 3,188 2,165 overall industry competition, and in the longer term, margin compression
FY11E-Net inc. 4,267 2,740 from wireless data are the key risks to our price target.
Source: J.P. Morgan estimates, Bloomberg
Table 1: Peer group valuation comparison

Company Stock Rating Price PT % to EV/EBITDA (x) P/E (x) Dividend Yield (%) FCF Yield (%)
code (LC) (LC) Target 2010E 2011E 2010E 2011E 2010E 2011E 2010E 2011E
PT Telkom TLKM IJ OW 8,050 9,800 21.7% 5.7 5.1 11.5 10.1 4.8 5.4 8.0 10.1
Indosat ISAT IJ N 4,950 4,500 -9.1% 5.4 4.6 20.0 14.5 2.8 3.5 -5.5 15.5
Excelcom EXCL IJ OW 4,150 5,600 34.9% 4.6 3.7 11.2 8.3 0.0 2.4 14.0 16.0
PLDT TEL PM N 2,430 2,800 15.2% 6.0 5.4 10.6 9.3 9.4 10.8 12.7 14.9
Globe Telecom GLO PM N 875 860 -1.7% 4.7 3.9 11.5 8.7 6.6 8.5 11.2 16.6
AIS ADVANC TB OW 91 115 26.0% 5.8 5.2 12.1 10.3 6.9 6.9 16.6 14.2
DTAC DTAC TB N 44.75 50 11.7% 5.3 5.1 11.3 11.7 4.4 4.3 18.7 7.6
Source: Company reports and J.P. Morgan estimates.
Note: Valuations based on closing prices on 26-Jul-2010.
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(65) 6882-2374 27 July 2010
Table of Contents
Investment summary................................................................4
Drove regional sector trends for years, now time to harvest........................................4
Significant estimate upside remains.............................................................................4
J.P. Morgan’s top pick in Southeast Asian Telecoms ..................................................4
Positive/negative drivers .........................................................4
Positive-Bharti in Indonesia.........................................................................................4
Positive-Data/wireless broadband................................................................................5
Positive-Competitive outlook ......................................................................................6
Valuation and share price analysis.........................................7
SWOT analysis .......................................................................10
J.P. Morgan vs. consensus ...................................................11
Revenue forecasts..................................................................12
Opex forecasts .......................................................................13
Full financial statements........................................................14
Excelcomindo: Summary of financials.................................17
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(65) 6882-2374 27 July 2010
Investment summary
Drove regional sector trends for years, now time to harvest
Excelcomindo’s adoption of a Bharti-like strategy when Axiata management was
introduced was a sea change for both Excelcomindo and the Indonesia telecom
space. We now expect Excelcomindo to harvest this work, as free cash flow turned
positive in 1Q09, margins continue to improve, and our forecasts have ROIC surging
to 20% this year from 1.7% in 2008.
Significant estimate upside remains

Our forecasts see 50-60% upside to EPS estimates for 2010-2012. We are not
significantly ramping up revenue growth rates or margins from current levels in order
to achieve these numbers.
J.P. Morgan’s top pick in Southeast Asian Telecoms

Excelcomindo, we believe, is the most attractive stock to own within our Southeast
Asian coverage universe. Low trading liquidity (shares trade US$1.1MM post the
March share placement) may keep some investors on the sidelines, in which case PT
Telkom would be our preferred exposure to the improving industry dynamics in
Indonesia.
Positive/negative drivers
Positive-Bharti in Indonesia
Axiata-installed management in Excelcomindo decided to “out Bharti” Bharti early
on, pursuing a strategy that hinged on aggressive cost management matched to
aggressively bringing down prices faster then the competition.
Figure 1: Excelcom/Telkomsel opex per outgoing minute

3.00
2.50
2.00
1.50
1.00
0.50
0.00
2006A
1Q07A
2Q07A
3Q07A
4Q07A
2007A
1Q08A
2Q08A
3Q08A
4Q08A
2008A
1Q09A
2Q09A
3Q09A
4Q09A
2009A
1Q10A
2010E
2011E
2012E
Ex celcom/Telkomsel
New management spent time with Bharti, Reliance, and Vodafone in India to begin
to benchmark cost structures. It also traveled to Thailand, where the key takeaway
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(65) 6882-2374 27 July 2010
was the risk of allowing network capacity to fall behind subscriber growth (and the
brand issues this can create).
Four initial Excelcomindo brands were merged into one in order to save marketing
dollars and prevent internal cannibalization (which they suggest TLKM and ISAT
are now experiencing). Excelcomindo now has the second-highest brand equity in the
market, according to third-party surveys (behind TLKM’s SIMPATI), and is the
second-largest brand by subscriber base in the market.
Opex per Minute was benchmarked against Bharti in particular. Management’s

biggest concern was to move fixed costs to variable as much as possible, in order to
insulate the margin structure from the volumes driven by price cuts. Management
notes that there were not a lot of easy wins. One large area of focus was ensuring that
the firm's top 1,000 employees understood the new philosophy...if people are just
focused on doing the same things more efficiently, you just end up being efficient at
doing the wrong things. Employees are encouraged to focus on returns and growth
rather then efficiency metrics.
Power was a main issue given that rates are high and reliability is low, which
required lots of generators. A recent AT Kearney cost survey shows that
Excelcomindo is now at the 80-90th percentile in most categories, scoring as a
world-class operator.
Management argues that the street automatically forecasts falling margins for the
firm, but notes that they have far different operating and financial leverage profiles
then either firm. Deprecation is falling now for Excelcomindo, vs. rising for their
peers, interest expenses are also falling for Excelcomindo vs. rising for their
competitors. Management sees their cost savings as sustainable, and margins steady
to down very slightly.
Positive-Data/wireless broadband
Mobile data services are growing rapidly for Excelcomindo, rising from 1% of
revenue for YE08 to 4% for YE09, targeting 8-10% by YE10. The large majority of
this is small-screen (handset) data, as management argues that the economic return
profile of large-screen wireless broadband (i.e. dongles or USB sticks) is “disastrous”
(small-screen economics are seen as very promising). Large-screen data margins are
“double-digit” negative, with no real change foreseen in the next five years.
Data dimensioning on a network is very different than voice, with very different
usage patterns, and ultimately these differences require a new way to manage
networks. As a result, management is taking data very slow…the potential is seen as
very exciting, but there is “lots to learn” about pricing.
Much of the current usage is being driven by adoption of social network services
(Bakrie management separately told us that Indonesia ranks in the top 4 global
markets for Facebook), rather than by any need to subsidize smart phones. They do
not see devices as a major driver of take-up rates, given that 40% of subscribers
currently use data, almost all off “normal” phones.
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(65) 6882-2374 27 July 2010
Positive-Competitive outlook
Sector competition is seen as fairly stable at this stage. Telkom is relatively
predictable with good assets and a large base to protect, and Bakrie is seen as a well-
run competitor. The rest of the second-tier operators are generally surviving on
shareholder support, and management is not sure how long this will last. Mobile8
appears to be working with SmartTel, and the Bakrie/Flexi deal could help spur some
consolidation.
Management suggests, however, that consolidation of the second tier will not have a
game-changing impact on the space, as all of them were price takers due to lack of
network assets. Consolidation would help to bring down overall marketing budgets,
given 25 brands across 11 operators at present.
The largest open question remains Indosat’s next strategy. It has moved from an
aggressive challenge to be #1, to a ‘high priced/low volume’ strategy, to a ‘low
price/high volume’ strategy. It is very unclear in which direction it will push next.
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(65) 6882-2374 27 July 2010
Valuation and share price analysis

Our investment philosophy has been simplified over the years. It is our belief that
ultimately share prices are driven by earnings estimates, an assumption holding true
for all of our coverage companies around the region.
Our simple valuation methodology is that we believe only two things can
mathematically move a share price: 1) changing earnings estimates; and 2) the
multiple the market is willing to put on those earnings estimates. This structure
allows us to focus our research on: 1) getting the numbers right; and 2)
understanding what potential range of multiples the market might apply. A simple
sum of the two leads to our price targets...i.e. if we have 10% upside to street EPS
forecasts, and think there could be 15% multiple expansion, our total target return is
25%.
This method allows us to capitalize on (hopefully) good fundamental research, but

also allows us to understand market sentiment. If a multiple has expanded to
previously unseen levels, either the business has changed or a lot of expectations
have already been built into the share price.
As per the J.P. Morgan vs. consensus table on page 11, we have approximately 51%
upside to 2010 EPS targets relative to the street. EXCL EPS estimates have been
increased 140% YTD. Our current 2010 EPS forecast is Rp375.
Figure 2: EXCL One-year forward consensus EPS estimate
Source: Bloomberg.
Excelcomindo shares have been bouncing off 14x forward earnings for much of the
past year, with share price performance driven almost entirely by earnings revisions.
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(65) 6882-2374 27 July 2010
Figure 3: EXCL one-year forward consensus P/E
Source: Bloomberg.
Figure 4: Excelcom price performance

4500 4500
Broker upgrades
To sell 7000 towers for US$ 753 mn
4Q09 revenue +36% YoY

4000 4000
FY09 subs +21% YoY

Lehman files bankruptcy
1H08 sales +65% YoY
US$ 300mn rights offer planned
3500 3500
1H07 net -17% YoY
30% cut in IC expected
3000 3000
2500 2500
2000 2000
1500 1500
1000 1000
500 500
Jan-07
Mar-07
Jul-07
Sep-07
Jan-08
Mar-08
Jul-08
Sep-08
Jan-09
Mar-09
Jul-09
Sep-09
Jan-10
Mar-10
Jul-10
May-07
Nov-07
May-08
Nov-08
May-09
Nov-09
May-10
Ex celcom price
Source: Bloomberg. The chart is priced as of 26-Jul-2010.
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(65) 6882-2374 27 July 2010
We run full discounted cash flow analysis on all of our companies, but do not use
this analysis to specifically set target prices. Our experience has been that the heavy
retail participation in most South East Asian markets leaves P/E multiples, and the
upside to street + upside to multiple approach described above a more effective way
of forecasting future share price movements. We instead use DCF analysis as
another gauge of market sentiment, by back calculating what discount rate is implied
by the current share price. A high discount rate would be indicative of either a) a
very risky business / market, or b) an excessively pessimistic sentiment applied by
the market. Per Table 2 below, Excelcom's share price (combined with our free cash
flow forecasts) implies a discount rate of 12.8%, amongst the lowest in its local, Thai
and Indonesian Telco peers.
Table 2: DCF summary

Current price (LC) 2012 Terminal growth rate 2010 Terminal value as % of EV Implied discount rate at current price
AIS 91.3 9.0% 76.5% 16.3%
DTAC 44.8 9.0% 81.8% 12.2%
PT Telkom 8,050 4.0% 84.6% 10.4%

Indosat 4,950 4.0% 67.8% 15.1%
Excelcom 4,150 4.0% 77.7% 12.8%
PLDT 2,430 9.9% 80.4% 16.8%

Globe 875 9.9% 81.9% 17.5%
Source: Company reports, Bloomberg and J.P. Morgan estimates. The table is priced as of 26-Jul-2010.
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(65) 6882-2374 27 July 2010
SWOT analysis
Strengths Weaknesses
• Ranks third amongst 11 wireless players with 15.9% • Relatively less well positioned to take advantage of
subscriber market share at end 1Q10. potential M&A opportunities. 2009 net debt/EBITDA at
2.0x.
• Lowest cost structure amongst Indonesian wireless
operators. Opex per minute down 69% from 1Q08 to • Brand confusion in the market with 11 players offering 25
Rp84/min at 1Q10. brands.
• Second-largest brand in the market. • High power rates and lack of proper power supply in the
country.
• Access to Axiata’s (Not Rated) balance sheet in case of
funding needs. • Quality of service has been an issue in Indonesia since
late 2007 with networks running at high utilization levels.
Opportunities Threats
• Best positioned to take advantage of upside in general • Disruptive competitive strategy move by Indosat could
economic conditions. We believe, there exists an inverse result in poor industry performance.
relationship between GDP correlation and firm market
• High degree of operating leverage in the business.
share.
• Threat to SMS revenues from social networking
• Real per person wireless penetration still low at ~50% and
applications.
active SIM penetration ~70%.
• Rise in power tariffs or fuel costs.
• Fast growing data adoption rates to drive revenue growth.
Data revenues up 70% in 1Q10. • Regulatory issues: New interconnect regime, mandatory
sharing of towers owned by telecom operators.
• Expected sector consolidation to ease out competition in
the market and free up additional spectrum.
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(65) 6882-2374 27 July 2010
J.P. Morgan vs. consensus

Table 3: Excelcom J.P. Morgan vs. consensus
Rp in billions, year-end December
Excelcom 2010E 2011E
Revenue-JPM 18,690 21,576
Revenue-consensus 16,508 18,743
% diff 13.2% 15.1%
Abs diff 2,181 2,833
EBITDA-JPM 9,687 11,043

EBITDA-consensus 7,841 8,856
% diff 23.5% 24.7%
Abs diff 1,846 2,188
EBITDA margin-JPM 51.8% 51.2%

EBITDA margin-consensus 47.5% 47.2%
BP diff 4.3 3.9
D&A-JPM (4,072) (4,336)

D&A-consensus (4,030) (4,367)
% diff 1.0% -0.7%
Abs diff (41) 30
Operating profit-JPM 5,615 6,707

Operating profit-consensus 3,811 4,489
% diff 47.3% 49.4%
Abs diff 1,804 2,218
tax+forex+financing-JPM (1,249) (862)

tax+forex+financing-consensus (853) (774)
% diff 46.4% 11.3%
Abs diff (396) (88)
PBT-JPM 4,366 5,845

PBT-consensus 2,958 3,715
% diff 47.6% 57.3%
Abs diff 1,409 2,130
Tax rate-JPM 27.0% 27.0%

Tax rate-consensus 26.8% 26.2%
BP diff 0.2 0.8
Net income-JPM 3,188 4,267

Net income-consensus 2,165 2,740
% diff 47.2% 55.7%
Abs diff 1,023 1,527
Shares-JPM 8,508 8,508

Shares-consensus 8,740 8,723
% diff -2.7% -2.5%
Abs diff (232) (215)
EPS-JPM 375 501

EPS-consensus 248 314
% diff 51.3% 59.7%
Abs diff 127 187
Source: Bloomberg and J.P. Morgan estimates.
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(65) 6882-2374 27 July 2010
Revenue forecasts
Table 4: Excelcom revenue
Rp B, YE Dec 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2010E 2011E 2012E
Voice
Blended outgoing/rev generating MOU-JPM calc 29 45 221 261 284 291 278 254 243 269 275 282
YoY 12.6% 54.8% 386.5% 140.7% 27.4% 12.6% 25.2% 15.2% -6.8% 5.7% 2.4% 2.5%
Outgoing voice ARPM (Rp/min) 947 569 121 76 81 81 84 81 89 87 83 80

YoY -17.2% -40.0% -78.8% -70.1% -37.6% -18.0% -11.2% -33.2% 17.9% 7.4% -4.6% -3.1%
Voice revenue (Rp bn) 2,747 3,866 6,623 1,503 1,705 1,818 2,033 7,059 2,074 9,598 11,010 12,475
Derived outgoing voice ARPU (Rp 000) - JPM calc 27.7 25.8 26.6 19.7 22.9 23.6 23.3 20.5 21.6 23.2 22.7 22.6
YoY -6.8% -7.1% 3.2% -28.0% -20.5% -7.7% 11.2% -23.0% 9.8% 13.5% -2.3% -0.7%
Wireless broadband
ARPU-JPM calc (Rp 000) NM NM 50 50 50 50 50 39 50 38 30 30
Wireless broadband revenue (Rp bn) 0 0 0 0 0 1 2 4 3 20 170 576
Other non-voice revenue

Other non-voice ARPU (Rp 000) - JPM calc 22.6 17.6 12.6 10.2 12.9 14.6 14.9 12.1 13.8 15.3 15.2 15.0
YoY 9.0% -22.3% -28.1% -28.1% -3.9% 23.3% 54.1% -4.6% 35.1% 26.8% -0.6% -1.4%
Other non voice revenue (Rp bn) 2,240 2,634 3,145 781 959 1,124 1,294 4,157 1,325 6,314 7,366 8,287
YoY 67.1% 17.6% 19.4% 8.0% 15.3% 31.9% 75.1% 32.2% 69.7% 51.9% 16.7% 12.5%
Total cellular revenue (Rp bn) 4,987 6,501 9,768 2,284 2,664 2,943 3,329 11,220 3,402 15,932 18,546 21,338
Derived blended ARPU (Rp 000)- JPM calc 50 43 39 30 36 38 38 33 35 39 38 39
YoY -0.3% -13.9% -9.5% -28.0% -15.2% 2.2% 24.8% -17.1% 18.6% 18.5% -0.8% 0.8%
Domestic Interconnection
Domestic Interconnect RPM (Rp) 614 130.4 19.2 12 11 11 10 10.9 10.4 10.4 10.4 10.4
YoY -24.1% -78.8% -85.2% -76.0% -37.5% -28.0% -35.3% -43.2% -9.6% -4.5% 0.0% 0.0%
Domestic interconnection revenues (Rp bn) 890 913 1,051 231 233 243 252 959 244 1,156 1,393 1,626
YoY 31.0% 2.6% 15.1% 95.6% 111.2% 89.4% 99.1% -8.7% 5.8% 20.6% 20.4% 16.7%
International roaming
Tourist arrivals (000) 4,871 5,506 6,215 1,406 1,559 1,654 1,704 6,324 1,610 7,020 7,581 8,112
YoY -2.6% 13.0% 12.9% 1.4% 4.2% -0.8% 2.4% 1.7% 14.5% 11.0% 8.0% 7.0%
International roaming revenues (Rp bn) 307 465 483 141 143 149 155 588 175 677 731 782
YoY 26.6% 51.6% 3.9% 20.0% 29.5% 16.2% 22.1% 21.6% 23.8% 15.1% 8.0% 7.0%
Other interconnection revenue (Rp bn) 5 5 3 1 1 1 1 4 1 4 4 4
Total interconnection revenues (Rp bn) 1,202 1,384 1,537 373 377 393 408 1,551 420 1,837 2,128 2,412
YoY 30.3% 15.1% 11.1% -0.5% 7.4% -3.7% 1.2% 0.9% 12.6% 18.5% 15.8% 13.3%
Tower revenues (Rp bn) 0 0 277 142 146 141 171 600 150 631 657 676
YoY NM NM NM 688.9% 111.6% 23.7% 126.5% 117.0% 5.6% 5.1% 4.0% 3.0%
Leased lines revenue (Rp bn) 239 409 478 107 118 96 106 427 100 404 396 392
YoY 156.6% 71.2% 17.1% -16.4% 0.9% -21.3% -4.9% -10.8% -6.5% -5.4% -2.0% -1.0%
Others (Rp bn) 38 72 96 20 24 18 20 81 94 159 165 170

YoY 69.6% 88.2% 33.6% -13.0% -11.1% 260.0% -52.1% -15.4% 370.0% 95.9% 4.0% 3.0%
Discounts
as % of total revenues 10.6% 4.5% 0.8% 0.8% 0.6% 1.2% 2.1% 1.2% 1.4% 1.4% 1.4% 1.4%
Discounts (Rp bn) (688) (375) (95) (24) (20) (43) (86) (173) (60) (273) (315) (360)
Total net revenue (Rp bn) 5,778 7,990 12,061 2,902 3,309 3,548 3,948 13,706 4,106 18,690 21,576 24,628
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Opex forecasts
Table 5: Excelcom Opex
Rp B, YE Dec 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2010E 2011E 2012E
GSM telecommunication charges
% of wireless revenue 3.4% 4.3% 5.3% 5.0% 4.2% 3.8% 4.0% 4.2% 4.2% 4.2% 4.2% 4.2%
BP change YoY (0.70) 0.89 1.02 (0.87) (0.99) (1.39) (1.07) (1.11) (0.78) (0.02) 0.00 0.00
GSM charge (Rp bn) (211) (339) (601) (132) (128) (127) (150) (538) (160) (744) (865) (994)
Interconnection charges
Interconnect charge per min (Rp 000) 294 165 28 17 16 15 16 16 15 15 15 15
YoY -9.6% -44.0% -82.8% -74.6% -45.3% -34.0% -23.9% -43.4% -10.8% -3.6% 0.0% 0.0%
Interconnection charges (Rp bn) (853) (1,120) (1,555) (345) (335) (332) (392) (1,404) (360) (1,712) (2,064) (2,409)
Other telecommunication services

Monthly expense per sub (Rp) 323 471 562 279 279 267 278 252 292 282 288 294
YoY 71.3% 45.9% 19.4% -58.0% -52.1% -48.9% -34.5% -55.2% 4.5% 11.9% 2.3% 2.0%
Other telecommunication services cost (Rp bn) (32) (71) (140) (21) (21) (21) (24) (87) (28) (116) (140) (163)
Infrastructure expenses
EOP BTS 7,260 11,157 16,729 17,232 18,128 18,790 19,349 19,349 19,904 22,567 24,941 26,965
Subscribers per BTS 1,312 1,386 1,555 1,445 1,361 1,418 1,625 1,625 1,634 1,657 1,740 1,810
YoY -56.7% 5.6% 12.2% -3.5% -20.3% -14.6% 4.5% 4.5% 13.1% 2.0% 5.0% 4.0%
License fee
Monthly license fee per BTS (Rp mn) 2.3 3.5 3.3 5.3 5.2 5.0 5.3 4.9 5.4 5.0 5.1 5.1
YoY NM 53.7% -6.7% 63.2% 36.7% 50.7% 11.7% 50.0% 1.0% 0.6% 2.2% 1.0%
License fee (Rp bn) (200) (472) (660) (274) (283) (283) (306) (1,145) (320) (1,344) (1,517) (1,657)
Rental expense
Monthly rental expense per BTS (Rp mn) 1.5 1.4 2.6 4.0 3.9 3.8 4.0 3.7 3.7 3.8 4.0 4.2
YoY NM -8.2% 84.3% 56.9% 31.4% 44.9% 7.4% 44.2% -8.2% 1.5% 6.2% 5.0%
Rental expense (Rp bn) (133) (188) (519) (207) (214) (214) (231) (866) (220) (1,024) (1,202) (1,365)
Utilities expense
Monthly Utilities expense per BTS (Rp mn) 1.3 1.4 1.9 2.8 2.7 2.6 2.8 2.6 2.7 2.6 2.8 3.0
YoY NM 5.8% 41.9% 45.3% 21.7% 34.1% -0.6% 33.5% -3.5% 2.6% 6.2% 5.0%
Utilities expense (Rp bn) (112) (182) (388) (144) (148) (148) (160) (599) (160) (717) (841) (955)
Repair and maintenance

Monthly expense per BTS (Rp mn) 1.93 1.75 1.51 2.09 2.05 1.97 2.07 1.94 2.01 1.77 1.70 1.66
YoY NM -9.3% -14.0% 40.2% 17.4% 29.4% -4.1% 28.8% -3.7% -8.6% -3.8% -2.8%
Repair and maintenance expense (Rp bn) (168) (235) (302) (108) (111) (111) (120) (451) (120) (480) (510) (536)
Others infrastructure expenses (Rp bn) - - (118) (7) (7) (7) (7) (28) (13) (52) (52) (52)
Sales commission and marketing

Monthly expense per sub (Rp ) 6,600 5,974 5,520 3,104 3,443 3,506 3,063 2,987 2,729 2,985 3,085 3,394
YoY 19.0% -9.5% -7.6% -46.0% -40.1% -32.5% -29.1% -45.9% -12.1% -0.1% 3.4% 10.0%
Sales & marketing expense (Rp bn) (654) (896) (1,374) (237) (256) (270) (267) (1,030) (262) (1,234) (1,513) (1,942)
Salaries and employee benefits

Number of employees 2,042 2,136 2,097 2,044 2,047 2,027 2,038 2,038 2,051 2,207 2,370 2,606
Subscribers/employee 4,666 7,242 12,406 12,178 12,056 13,151 15,433 15,433 15,867 16,976 18,674 19,607
YoY 24.8% 55.2% 71.3% 41.5% 12.7% 12.9% 24.4% 24.4% 30.3% 10.0% 10.0% 5.0%
Avg. monthly cost per employee (Rp mn) 21 23 28 29 35 36 28 31 33 34 36 37
YoY 43.0% 8.6% 24.3% 12.0% 36.0% 6.8% -1.8% 10.2% 15.5% 8.8% 4.9% 2.6%
Salary expense (Rp bn) (494) (574) (723) (178) (212) (218) (170) (778) (203) (869) (984) (1,097)
Supplies and overhead

Monthly supplies & overhead per sub (Rp 000) 3.70 2.69 2.20 1.77 1.88 1.90 1.78 1.67 1.24 1.72 1.74 1.8
YoY -1.7% -27.3% -18.3% -23.9% -3.6% -10.8% -23.4% -24.1% -29.8% 2.8% 1.2% 1.0%
Supplies & overhead (Rp bn) (367) (404) (548) (135) (140) (146) (155) (576) (119) (709) (843) (971)
Total operating expense (Rp bn) (3,224) (4,480) (6,929) (1,788) (1,855) (1,876) (1,983) (7,501) (1,965) (9,003) (10,532) (12,142)
As % of total revenue 49.9% 53.6% 57.0% 61.1% 55.7% 52.2% 49.2% 54.0% 47.2% 47.5% 48.1% 48.6%
13
(65) 6882-2374 27 July 2010
Full financial statements

Table 6: Excelcomindo profit and loss
Rp B, YE Dec 2008 2009 2010E 2011E 2012E
Cellular-voice 6,623 7,059 9,598 11,010 12,475
Cellular-non voice 3,145 4,161 6,334 7,536 8,862
Cellular-interconnect and roaming 1,537 1,551 1,837 2,128 2,412
Other telecom (leased line, tower etc.) 851 1,108 1,194 1,218 1,238
Total gross revenue 12,156 13,879 18,963 21,891 24,988
Discounts (95) (173) (273) (315) (360)
Total net revenue 12,061 13,706 18,690 21,576 24,628
Operating Expenses
COGS/Interconnect charges (2,296) (2,028) (2,573) (3,070) (3,566)
Infrastructure expenses (1,989) (3,089) (3,617) (4,123) (4,565)
Sales commission and marketing (1,374) (1,030) (1,234) (1,513) (1,942)
Salaries and employee benefits (723) (778) (869) (984) (1,097)
Supplies and overhead (548) (576) (709) (843) (971)
Total operating expenses (6,929) (7,501) (9,003) (10,532) (12,142)
EBITDA 5,132 6,205 9,687 11,043 12,486

EBITDA margin (%) 43% 45% 52% 51% 51%
Depreciation and amortization (3,379) (3,741) (4,072) (4,336) (4,527)
Operating income 1,753 2,464 5,615 6,707 7,958

Interest expense (1,122) (1,274) (1,144) (923) (622)
Interest income 28 69 34 61 71
Foreign exchange gain/loss, net (332) 745 (60) 0 0
Others (401) 360 (78) 0 0
Total other Income (Expenses) (1,828) (100) (1,249) (862) (550)
PBT (75) 2,364 4,366 5,845 7,408

Income tax benefit (expense) 60 (654) (1,179) (1,578) (2,000)
Tax rate 80% 28% 27% 27% 27%
Net income (15) 1,710 3,188 4,267 5,408
EPS (Rp) (2) 237 375 501 636
non recurring items 363 (346) (21) 0 0
Normalized profit 348 1,364 3,167 4,267 5,408
Normalized EPS (Rp) 49 189 372 501 636
DPS (Rp) 0 0 0 100 127
14
(65) 6882-2374 27 July 2010
Table 7: Excelcomindo balance sheet

Rp B, YE Dec 2008 2009 2010E 2011E 2012E
Cash and cash equivalents 1,170 748 1,357 1,587 1,233
Trade receivables 385 332 453 523 597
Advances and other prepayments 378 482 578 676 780
Other assets 1,267 445 445 445 445
Total current assets 3,201 2,007 2,833 3,231 3,055
Fixed assets 23,180 23,616 24,284 25,353 26,321

Other assets 2,012 1,756 1,756 1,756 1,756
Total non current assets 25,192 25,373 26,041 27,109 28,077
Total assets 28,393 27,380 28,874 30,340 31,132
Trade & other payables 3,707 2,815 3,379 3,953 4,557

Taxes payable 101 120 120 120 120
Deferred revenue 591 598 815 941 1,074
ST and current maturities of LT loans 1,278 2,475 2,475 2,475 2,475
Total current liabilities 5,678 6,009 6,790 7,490 8,227
Total long term debt 17,443 10,988 8,513 5,013 513

Others 964 1,580 1,580 1,580 1,580
Total non current liabilities 18,407 12,568 10,093 6,593 2,093
Minority interests 0 0 0 0 0
Share capital 709 851 851 851 851

Capital surplus 2,692 5,336 5,336 5,336 5,336
Retained earnings 907 2,617 5,804 10,071 14,626
Total stockholders equity 4,308 8,803 11,991 16,257 20,812
Total liabilities and stockholders equity 28,393 27,380 28,874 30,340 31,132
15
(65) 6882-2374 27 July 2010
Table 8: Excelcomindo cash flows

Rp B, YE Dec 2008 2009 2010E 2011E 2012E
PBT (75) 2,364 4,366 5,845 7,408
Depreciation and amortization 3,379 3,741 4,072 4,336 4,527
Changes in working capital
Decrease (increase) in trade receivables (77) 53 (121) (70) (74)
Decrease (increase) in advances & others (158) (103) (96) (98) (103)
(Decrease) increase in trade & other payables 518 (892) 564 574 604
(Decrease) increase in taxes payable 5 19 0 0 0
(Decrease) increase in deferred revenue 181 6 217 126 133
Profits tax paid 60 (654) (1,179) (1,578) (2,000)
Others (245) 0 0 0 0
Interest expense 1,122 1,274 1,144 923 622
Net cash from operating activities 4,710 7,718 8,968 10,058 11,117
Purchase of fixed assets/intangibles (11,382) (5,283) (4,740) (5,405) (5,495)

Others (132) 159 0 0 0
Net cash from investing activities (11,514) (5,123) (4,740) (5,405) (5,495)
Receipts from IPO net of costs 0 2,786 0 0 0

Interest paid (1,159) (1,297) (1,144) (923) (622)
Net proceeds from loans 8,564 (4,499) (2,475) (3,500) (4,500)
Cash dividend paid (142) 0 0 0 (853)
Net cash provided by financing activities 7,263 (3,011) (3,619) (4,423) (5,975)
Net increase(decrease) in cash 459 (416) 609 230 (353)

Cash beginning 806 1,170 748 1,357 1,587
Effect of exchange rate changes (94) (6) 0 0 0
Cash ending 1,170 748 1,357 1,587 1,233
Net debt/(cash) 17,551 12,716 9,632 5,902 1,755

16
(65) 6882-2374 27 July 2010
Excelcomindo: Summary of financials
Profit and Loss Balance Sheet

Dec YE, Rp Bn 2008 2009 2010E 2011E 2012E Dec YE, Rp Bn 2008 2009 2010E 2011E 2012E
Revenue 12,061 13,706 18,690 21,576 24,628 Cash and equivalents 1,170 748 1,357 1,587 1,233
EBITDA 5,132 6,205 9,687 11,043 12,486 Accounts receivable 385 332 453 523 597
Depreciation (3,379) (3,741) (4,072) (4,336) (4,527) Others 785 416 903 1,063 636
Amortization 0 0 0 0 0 Total current assets 3,201 2,007 2,833 3,231 3,055
EBIT 1,753 2,464 5,615 6,707 7,958
Interest income 28 69 34 61 71 ST loans 1,278 2,475 2,475 2,475 2,475
Finance costs (1,122) (1,274) (1,144) (923) (622) Others 4,400 3,533 4,314 5,014 5,752
Associates 0 0 0 0 0 Total current liabilities 5,678 6,009 6,790 7,490 8,227
Profit before tax (75) 2,364 4,366 5,845 7,408
Tax 60 (654) (1,179) (1,578) (2,000) Net working capital (2,477) (4,002) (3,957) (4,259) (5,172)
Minorities 0 0 0 0 0
Net profit - reported (15) 1,710 3,188 4,267 5,408 Net fixed assets 23,180 23,616 24,284 25,353 26,321
Net profit - adjusted 348 1,364 3,167 4,267 5,408 Other long term assets 2,012 1,756 1,756 1,756 1,756
Total non-current assets 25,192 25,373 26,041 27,109 28,077
Shares Outstanding (mn) 7,090 7,210 8,508 8,508 8,508
EPS (Rp) (Reported) (2) 237 375 501 636 Total assets 28,393 27,380 28,874 30,340 31,132
EPS (Adjusted) 49 189 372 501 636
DPS (Rp) - - - 100.3 127.1 Long term debt 17,443 10,988 8,513 5,013 513
DPS payout ratio 0% 0% 0% 20% 20% Other liabilities 964 1,580 1,580 1,580 1,580
Total liabilities 24,085 18,577 16,883 14,083 10,320
Revenue growth 51.0% 13.6% 36.4% 15.4% 14.1%
EBITDA growth 46.2% 20.9% 56.1% 14.0% 13.1% Shareholders equity 4,308 8,803 11,991 16,257 20,812
Net profit growth (adjusted) -51.9% 292.4% 132.2% 34.7% 26.8%
Recurring EPS growth -51.9% 285.8% 96.7% 34.7% 26.8% Total liabilities and equity 28,393 27,380 28,874 30,340 31,132
DPS growth -100.0% NM NM NM 26.8%
Net debt/(cash) 17,551 12,716 9,632 5,902 1,755
Book value per share 608 1,221 1,409 1,911 2,446
Ratios Cash Flow

Dec YE, Rp Bn 2008 2009 2010E 2011E 2012E Dec YE, Rp Bn 2008 2009 2010E 2011E 2012E
EBITDA margin 42.5 45.3 51.8 51.2 50.7 Cash flow from operations 4,710 7,718 8,968 10,058 11,117
FCF margin (60.5) 16.2 16.5 17.3 20.3 Capex (11,382) (5,283) (4,740) (5,405) (5,495)
ROE 8.1 15.5 26.4 26.2 26.0 Cash flow from other investing (132) 159 0 0 0
ROC 7.6 11.1 24.4 28.2 33.4 Cash flow from financing 7,263 (3,011) (3,619) (4,423) (5,975)
ROA 6.2 9.0 19.4 22.1 25.6
Change in cash for year 459 (416) 609 230 (353)
Tax rate 79.6 27.7 27.0 27.0 27.0
Capex to sales 89.9 30.6 25.4 25.1 22.3 Beginning cash 806 1,170 748 1,357 1,587
Debt/capital 81.3 60.5 47.8 31.5 12.6 Closing cash 1,170 748 1,357 1,587 1,233
Net debt or (cash) to equity 407.4 144.4 80.3 36.3 8.4
Interest cover (X) 4.7 5.1 8.7 12.8 22.7
Source: Company data, J.P. Morgan estimates
17
(65) 6882-2374 27 July 2010
JPM Q-Profile
XL Axiata (INDONESIA / Telecommunication Services)
As Of: 23-Jul-2010 Quant_Strategy@jpmorgan.com
Local Share Price Current: 4150.00 12 Mth Forward EPS Current: 300.29
4,500.00 350.00
4,000.00 300.00
3,500.00 250.00
3,000.00 200.00
2,500.00 150.00
2,000.00 100.00
1,500.00 50.00
1,000.00 0.00
500.00 -50.00
0.00 -100.00
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Earnings Yield (& local bond Yield) Current: 7% Implied Value Of Growth* Current: 45.44%
30% 12Mth fwd EY Indonesia BY Proxy 1.40
1.20
25% 1.00
0.80
20%
0.60
0.40
15%
0.20
0.00
10%
-0.20
5% -0.40
-0.60
0% -0.80
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
PE (1Yr Forward) Current: 13.8x Price/Book Value Current: 4.0x
80.0x 6.0x PBV hist PBV Forward
70.0x
5.0x
60.0x
50.0x
4.0x
40.0x
30.0x 3.0x
20.0x
2.0x
10.0x
0.0x
1.0x
-10.0x
-20.0x 0.0x
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
ROE (Trailing) Current: 26.08 Dividend Yield (Trailing) Current: 0.00
50.00 3.0
40.00 2.5
30.00
2.0
20.00
1.5
10.00
1.0
0.00
-10.00 0.5
-20.00 0.0
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Summary
XL Axiata 3901.46 As Of: 23-Jul-10
INDONESIA 1.240262 SEDOL B0LD0W9 Local Price: 4,150.00
Telecommunication Services Diversified Telecommunication EPS: 300.29
Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg
12mth Forward PE 13.82x 3.57 75.00 17.41 25.10 64.82 -14.62 -74% 443% 26% 82%
P/BV (Trailing) 4.01x 1.14 5.60 3.37 3.23 5.23 1.23 -72% 40% -16% -19%
Dividend Yield (Trailing) 0.00 0.00 2.38 0.00 0.39 1.67 -0.90
ROE (Trailing) 26.08 -16.01 44.71 7.54 11.50 46.50 -23.49 -161% 71% -71% -56%
Implied Value of Growth 45.4% -0.54 0.96 0.61 0.60 1.15 0.04 -218% 112% 34% 32%
Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)
18
(65) 6882-2374 27 July 2010
All Data As Of 26-Jul-10
Q-Snapshot: XL Axiata
Quant Return Drivers (a Score >50% indicates company ranks 'above average') J.P. Morgan Composite Q-Score
Score 0% (worst) to 100% (best) vs Country vs Industry Raw Value
100% HIGH/STRONGER
Value
P/E Vs Market (12mth fwd EPS) 46% 60% 1.0x C
75%
P/E Vs Sector (12mth fwd EPS) 39% 54% 1.1x O
EPS Growth (forecast) 86% 89% 38.6% U
50%
Value Score 67% 77% N
Price Momentum T
25%
12 Month Price Momentum 95% 98% 220.3% R
1 Month Price Reversion 63% 42% 2.5% Y 0% LOW/WEAKER
Momentum Score 97% 98%
0% 25% 50% 75% 100%
Quality
Return On Equity (forecast) 64% 73% 23.5% INDUSTRY
Earnings Risk (Variation in Consensus) 26% 42% 0.18 Quant Return Drivers Summary (vs Country)
Quality Score 42% 63%
100%
Earnings & Sentiment
Earnings Momentum 3mth (risk adjusted) 89% 92% 139.5 75%
1 Mth Change in Avg Recom. 20% 7% -0.13 50%
Net Revisions FY2 EPS 84% 98% 100% 25%
Earnings & Sentiment Score 85% 85%
0%
COMPOSITE Q-SCORE* (0% To 100%) 93% 97% VALUE PRICE QUALITY EARNINGS
Targets & Recommendations** EPS Revisions** EPS Momentum (%) Historical Total Return (%)
14 Targets Recoms 10 30.0 250 220
Consensus Changes (4wks)
Consensus Changes (4wks)
12 25.0
(Local Currency %)
8 200
10 20.0
8 6 150
(%)
15.0 84
6 4 100
4 10.0
2 2 5.0 50 21
2
0 0 0.0 0
Up Dn Unchanged Up Dn Unchanged -1 Mth -3 Mth 1Mth 3Mth 1Yr 3Yr
FY1 FY2 FY1 FY2
Consensus Growth Outlook (%)
60.0 50.0 50.0
50.0
40.0
27.2
30.0 23.8
20.0 11.2 14.1
10.0
0.0
EPS Actual To FY1 EPS FY1 To FY2 EPS FY2 To FY3 Cash Flow FY1 To FY2 Dividends FY1 To FY2 Sales FY1ToFY2
Closest in Country by Size (Consensus. ADV = average daily value traded in US$m over the last 3 mths)
Code Name Industry USD MCAP ADV PE FY1 Q-Score*
BBNI-ID Bank Negara Indonesia Regional Banks 4,937 6.92 11.9 88%
ITMG-ID Indo Tambangraya Megah Coal 4,813 4.74 14.4 81%
INCO-ID International Nickel Indonesia Other Metals/Minerals 4,584 9.89 13.6 61%
INDF-ID IndoFood Sukses Makmur Food: Specialty/Candy 4,293 9.14 17.5 69%
PTBA-ID Tambang Batubara Bukit Asam Coal 4,201 8.69 14.9 59%
EXCL-ID XL Axiata Major Telecommunications 3,854 1.28 15.8 93%
AALI-ID Astra Agro Lestari Agricultural Commodities/Milling 3,698 3.64 14.6 41%
BUMI-ID Bumi Resources Coal 3,640 39.55 10.7 90%
ISAT-ID Indosat Wireless Telecommunications 2,957 1.42 16.8 9%
PNBN-ID Bank Pan Indonesia Regional Banks 2,848 0.75 18.5 53%
BYAN-ID Bayan Resources Coal 2,762 0.68 31.5 18%
Source: Factset, Thomson and J.P. Morgan Quantitative Research. For an explanation of the Q-Snapshot, please visit http://jpmorgan.hk.acrobat.com/qsnapshot/
Q-Snapshots are a product of J.P. Morgan’s Global Quantitative Analysis team and provide quantitative metrics summarized in an overall company 'Q-Score.'
Q-Snapshots are based on consensus data and should not be considered as having a direct relationship with the J.P. Morgan analysts’ recommendation.
* The Composite Q-Score is calculated by weighting and combining the 10 Quant return drivers shown. The higher the Q-Score the higher the one month
expected return. On a 14 Year back-test the stocks with the highest Q-Scores have been shown (on average) to significantly outperform those stocks with the
lowest Q-Scores in this universe. ** The number of up, down and unchanged target prices, recommendations or EPS forecasts that make up consensus.
19
(65) 6882-2374 27 July 2010
Other Companies Recommended in This Report (all prices in this report as of market close on 26 July 2010, unless
otherwise indicated)
PT Telekomunikasi Indonesia Tbk (TLKM.JK/Rp8,100 [22-July-2010]/Overweight)
Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures
• Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for
Excelcomindo within the past 12 months.
• Client of the Firm: Excelcomindo is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to
the company investment banking services, non-investment banking securities-related services and non-securities-related services. PT
Telekomunikasi Indonesia Tbk is or was in the past 12 months a client of JPMSI.
• Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking
services from Excelcomindo.
• Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment
banking services in the next three months from Excelcomindo.
• Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other
than investment banking from Excelcomindo. An affiliate of JPMSI has received compensation in the past 12 months for products or
services other than investment banking from Excelcomindo.
Excelcomindo (EXCL.JK) Price Chart
6,792
5,660
4,528
Price(Rp)
3,396
2,264
1,132
0
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
07 07 07 08 08 08 08 09 09 09 09 10 10
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it
over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.
20
(65) 6882-2374 27 July 2010
PT Telekomunikasi Indonesia Tbk (TLKM.JK) Price Chart
Date Rating Share Price Price Target

19,593 N Rp12,000
OW Rp12,300
N Rp10,900
OW Rp10,300 N Rp7,150 (Rp) (Rp)
03-Nov-06 N 8500 8400
16,794 N Rp9,500
OW Rp11,500
OW Rp13,500N Rp10,400 OW Rp7,200 N
15-Jan-07 N 9600 9500
13,995 N Rp8,400 25-Mar-07 N 9700 12000
OW Rp12,000 OW Rp15,750N Rp10,200
OW Rp9,500 N Rp7,000
N Rp8,500 N Rp9,300
26-Mar-07 OW 9700 12000
Price(Rp) 11,196 31-May-07 OW 9550 11500
03-Aug-07 OW 10900 12300
8,397
19-Oct-07 OW 12150 15750
5,598 05-Nov-07 OW 11400 13500
11-Dec-07 N 11100 10900
2,799 11-Apr-08 N 9150 10200
25-Apr-08 N 8650 10400
0
Sep Jun Mar Dec Sep Jun
27-May-08 OW 8050 10300
06 07 08 08 09 10 01-Aug-08 OW 7650 9500
03-Nov-08 OW 5300 7200
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage Apr 28, 2010 - Jul 26, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the 30-Jan-09 N 6300 7150
current analyst may or may not have covered it over the entire period.
07-Apr-09 N 7050 7000
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.
31-Jul-09 N 9400 8500
03-Feb-10 N 9350 9300
28-Apr-10 N 7800 --
Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

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average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
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Coverage Universe: James R. Sullivan, CFA: Singapore Telecom (STEL.SI)
J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2010

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(buy) (hold) (sell)
JPM Global Equity Research Coverage 46% 42% 12%
IB clients* 49% 46% 31%
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IB clients* 68% 61% 53%
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21
(65) 6882-2374 27 July 2010
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Asia Pacific Equity Research

• We initiate coverage of Excelcomindo with an Overweight rating Indonesia

contraction ). Excelcom (EXCL) is our preferred regional exposure to (65) 6882-2374

quality of service rather then cutting prices. We forecast 36% YoY

• Potential negative risks to our price target include destructive price-

• This report is a companion to our report “TIP Telcos: Waiting for

Company Description P&L sensitivity metrics EBITDA EPS

Price target methodology

Peak P/E (b) 14.0 14.0

Table 1: Peer group valuation comparison

Significant estimate upside remains

J.P. Morgan’s top pick in Southeast Asian Telecoms

Figure 1: Excelcom/Telkomsel opex per outgoing minute

Source: Company reports and J.P. Morgan estimates.

Opex per Minute was benchmarked against Bharti in particular. Management’s

Valuation and share price analysis

This method allows us to capitalize on (hopefully) good fundamental research, but

Figure 2: EXCL One-year forward consensus EPS estimate

Figure 3: EXCL one-year forward consensus P/E

Figure 4: Excelcom price performance

4Q09 revenue +36% YoY

FY09 subs +21% YoY

US$ 300mn rights offer planned

30% cut in IC expected

Source: Bloomberg. The chart is priced as of 26-Jul-2010.

Table 2: DCF summary

PT Telkom 8,050 4.0% 84.6% 10.4%

PLDT 2,430 9.9% 80.4% 16.8%

J.P. Morgan vs. consensus

EBITDA-JPM 9,687 11,043

EBITDA margin-JPM 51.8% 51.2%

D&A-JPM (4,072) (4,336)

Operating profit-JPM 5,615 6,707

tax+forex+financing-JPM (1,249) (862)

PBT-JPM 4,366 5,845

Tax rate-JPM 27.0% 27.0%

Net income-JPM 3,188 4,267

Shares-JPM 8,508 8,508

EPS-JPM 375 501

Outgoing voice ARPM (Rp/min) 947 569 121 76 81 81 84 81 89 87 83 80

Other non-voice revenue

Other interconnection revenue (Rp bn) 5 5 3 1 1 1 1 4 1 4 4 4

Others (Rp bn) 38 72 96 20 24 18 20 81 94 159 165 170

Other telecommunication services

Repair and maintenance

Sales commission and marketing

Salaries and employee benefits

Supplies and overhead

Full financial statements

EBITDA 5,132 6,205 9,687 11,043 12,486

Operating income 1,753 2,464 5,615 6,707 7,958

PBT (75) 2,364 4,366 5,845 7,408

Table 7: Excelcomindo balance sheet

Fixed assets 23,180 23,616 24,284 25,353 26,321

Total assets 28,393 27,380 28,874 30,340 31,132

Trade & other payables 3,707 2,815 3,379 3,953 4,557

Total long term debt 17,443 10,988 8,513 5,013 513

Share capital 709 851 851 851 851

Table 8: Excelcomindo cash flows

Purchase of fixed assets/intangibles (11,382) (5,283) (4,740) (5,405) (5,495)

Receipts from IPO net of costs 0 2,786 0 0 0

Net increase(decrease) in cash 459 (416) 609 230 (353)

Net debt/(cash) 17,551 12,716 9,632 5,902 1,755

Excelcomindo: Summary of financials