2019 Outlook

Telecommunication
2Q19/3Q19

June 2019
 SAMUEL ASET MANAJEMEN

Disclaimer
This report is specifically prepared for PT Samuel Aset Manajemen (PT SAM) internal use and therefore
should not be considered or intended as an offer to sell or a solicitation to buy the securities referred to
herein for the general public. Investments involve risks, and investors should exercise prudence and their
own judgement in making their investment decisions.

The information contained herein has been obtained from sources believed to be reliable but such sources
have not been independently verified by PT SAM and consequently no representation is made as to the
accuracy or completeness of this report by PT SAM and it should not be relied upon as such. Accordingly,
PT SAM and its representatives shall not be liable for any direct, indirect, or consequential losses or
damages that may arise from the use or reliance of this report.

This report may contain forward looking statements. Such forward looking statements are based on
assumptions made and information currently available to us and are subject to certain risks and
uncertainties that could cause the actual results to differ materially from those expressed in any forward
looking statements. PT SAM expressly disclaims any obligation to update or revise any such forward
looking statements to reflect new information, events, or circumstances after the date of this publication.

Each contributor to this report certifies that all the views expressed accurately reflect his or her own
personal views and are not and will not be influenced by any part or all of his or her compensation. In
addition, the views expressed in this report are those of the contributors and do not necessarily reflect the
views of PT SAM.

2
 SAMUEL ASET MANAJEMEN

Quarterly Perspective
Review and outlook
Telco 1Q19 2Q19e 3Q19e FY19e

Catalysts 1. Defensive stocks 1. Defensive stocks 1. Defensive stocks 1. Defensive stocks

2. Liquidity-driven stock 2. Liquidity-driven stock 2. Liquidity-driven stock 2. Liquidity-driven
3. Stable margin 3. Stable margin 3. Stable margin stock
4. Dividend play 4. Dividend play 4. Dividend play 3. Stable margin
5. Possibility of M&A 5. Possibility of M&A 5. Index adjustment 4. Dividend play
6. Index adjustment 6. Growth recovery 5. Possibility of M&A
6. Growth recovery
Risks 1. Slower growth 1. Slower growth 1. Slower growth 1. Slower growth
2. Normalize margin 2. Normalize margin 2. Normalize margin 2. Normalize margin
3. Regulatory risk 3. Regulatory risk 3. Regulatory risk 3. Regulatory risk
4. Regional trend risk 4. Regional trend risk 4. Regional trend risk 4. Regional trend risk
5. De-rating valuation 5. De-rating valuation 5. De-rating valuation 5. De-rating valuation
6. FX risk 6. FX risk 6. FX risk 6. FX risk
Rating UNDERWEIGHT OVERWEIGHT OVERWEIGHT OVERWEIGHT

Outlook POSITIVE STABLE STABLE STABLE

Top picks:

TLKM TLKM & EXCL TLKM & EXCL TLKM & EXCL
Source: SAM Research
3
 SAMUEL ASET MANAJEMEN

First Things First

Evaluate our call YTD
YTD SAM Telco vs JCI YTD Telco vs JCI
15% 150%
10%
100%
5%
0% 50%
-5%
0%
-10%
8-Feb
11-Jan

25-Jan

22-Feb

8-Mar

22-Mar

5-Apr

19-Apr

17-May
3-May

31-May
28-Dec

14-Jun
-50%
28-Dec 28-Jan 28-Feb 31-Mar 30-Apr 31-May

JCI SAM Telco JCI TLKM EXCL ISAT

YTD Telco vs SAM Telco YTD TLKM vs Big Caps

140% 30%
120%
100% 20%
80% 10%
60%
40% 0%
20% -10%
0%
-20% -20%
5-Apr
8-Feb
11-Jan

25-Jan

22-Feb

8-Mar

22-Mar

19-Apr

3-May

17-May

31-May
28-Dec

14-Jun

-30%
28-Dec 28-Jan 28-Feb 31-Mar 30-Apr 31-May

SAM Telco TLKM EXCL ISAT TLKM ASII HMSP UNVR BBCA BBRI BMRI

Source: Bloomberg, SAM Research

*Data as of 27 June 2019 (first session)
4
 SAMUEL ASET MANAJEMEN

Second Thing
Evaluate our call QTD
QTD SAM Telco vs JCI QTD Telco vs JCI
5% 20%
10%
0%
0%
-5% -10%
-20%
-10%
-30%
-15% -40%
26-Apr
29-Mar

5-Apr

12-Apr

19-Apr

17-May

17-May
3-May

10-May

24-May

31-May

29-Mar

5-Apr

12-Apr

19-Apr

26-Apr

3-May

10-May

24-May

31-May

7-Jun
7-Jun

14-Jun

21-Jun

14-Jun

21-Jun
JCI SAM Telco JCI TLKM EXCL ISAT

QTD Telco vs SAM Telco QTD TLKM vs Big Caps

20% 10%
5%
0% 0%
-5%
-20% -10%
-15%
-40% -20%
12-Apr

19-Apr

26-Apr

10-May

17-May

24-May

31-May
3-May
5-Apr
29-Mar

14-Jun
7-Jun

21-Jun

29-Mar

10-May

17-May

24-May

31-May
5-Apr

12-Apr

19-Apr

26-Apr

3-May

7-Jun

14-Jun

21-Jun
SAM Telco TLKM EXCL ISAT TLKM ASII HMSP UNVR BBCA BBRI BMRI

Source: Bloomberg SAM Research

*Data as of 27 June 2019 (first session)
5
 SAMUEL ASET MANAJEMEN

Thesis
A cyclical recovery for this year
▪ Growth has bottoming out in 2Q18 and picking TLKM growth yoy
up since 3Q-4Q18. Data revenue growth is now 80%
offset the decrease in legacy revenue. EBITDA 60%
growth and margin are expected to recover. 40%
▪ Data yield are stabilizing; data volume still 20%
growing at slower rate. Smaller legacy revenue 0%

portion. Domestic data yield at par with regional. -20%

Valuation revert to the mean after several

-40%
▪

1Q14

1Q19
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
quarters of de-rating both in domestic and
regional. EBITDA Data Legacy

EXCL growth yoy ISAT growth yoy

100% 80%
80% 60%
60% 40%
20%
40%
0%
20% -20%
0% -40%
-20% -60%
-40% -80%
1Q14

1Q19
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19

EBITDA Data Legacy EBITDA Data Legacy

Source: Company, Bloomberg, SAM Research

6
 SAMUEL ASET MANAJEMEN

Revenue Mix
Data as a big chunk; lower contribution from legacy; limited pressure on margin?
Industry revenue mix TLKM revenue mix
100% 100%

80% 80%
37% 32% 29% 27% 26% 22% 30% 29% 29% 24%
44% 41% 38% 35% 37% 43% 42% 39% 38% 33%
60% 41% 55% 45% 60% 60% 47% 38%

40% 40%
52% 54% 55% 55% 60%
53% 54% 52% 58%
45% 49% 46% 42% 43% 46% 49%
20% 36% 40% 36% 43% 20% 37% 35% 42% 41%
34% 33%
0% 0%
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Data Legacy Others Data Legacy Others

EXCL revenue mix ISAT revenue mix

100% 100%

80% 20% 17% 80%

34% 30% 27% 25% 24% 22%
42% 38% 38% 37% 32% 31% 29% 26%
47% 40% 19% 16%
60% 54% 52% 60% 43% 43% 41%
46%
40% 74% 40%
63% 63% 63% 65% 68%
56% 59% 54% 54% 54% 56% 53% 57%
46% 50% 43% 47% 49%
20% 32% 34% 40% 20% 33% 37% 35% 36%

0% 0%
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Data Legacy Others Data Legacy Others

Source: Company, SAM Research

7
 SAMUEL ASET MANAJEMEN

Data Yield
Stabilize since 2Q18; TSEL data yield at par with regional player
Data yield (IDR/MB) Regional data yield (IDR/MB)
50 50
40 40
30 30
20 20
10 10
- -
4Q16

4Q17
1Q16

2Q16

3Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

1Q18

2Q18

3Q18

4Q18

1Q19
TSEL EXCL ISAT TSEL Celcom AIS PLDT

TSEL data yield premium TSEL data yield premium/discount

140% 60%
120% 40%
100% 20%
80%
0%
60%
-20%
40%
20% -40%

4Q15

2Q16
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15

1Q16

3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
0%
3Q14
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14

4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19

TSEL data yield premium to Celcom TSEL data yield premium to AIS
TSEL data yield premium to EXCL TSEL data yield premium to ISAT TSEL data yield premium to PLDT

Source: Company, SAM Research

8
 SAMUEL ASET MANAJEMEN

Data Usage and Subscribers

Slower data volume growth as smartphone penetration >70%
Data payload Data usage
3,000,000 200% 5.0 100%
2,500,000 4.0 80%
150%
2,000,000
3.0 60%
1,500,000 100%
2.0 40%
1,000,000
50% 1.0 20%
500,000
- 0% - 0%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19

2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
Data payload (TB) growth yoy Data usage (3G/4G user/month) (GB) growth yoy

Smartphone penetration +/- ON 3G/4G USER

100%
30

MN USER
80% 20
60% 10
40% -
20% (10)
0% (20)
4Q18

4Q15
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18

1Q19

3Q14
4Q14
1Q15
2Q15
3Q15

1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
TSEL EXCL ISAT Industry TSEL EXCL ISAT

Source: Company, SAM Research

9
 SAMUEL ASET MANAJEMEN

Lesson from Regional Trend

Price war; industry growth and margin
Data yield trend Regional growth yoy
2Q15-3Q16 2Q17-2Q18 20%

10%

0%
-17%
-27% -10%
-36% -34%
-40% -20%

2Q16
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16

3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
-50% -51%

TSEL Celcom AIS PLDT Average revenue growth yoy Average EBITDA growth yoy

EBITDA margin Domestic growth yoy

55% 40%
50%
20%
45%
40% 0%
35%
-20%
30%
25% -40%
4Q14

2Q18

2Q16
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14

1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18

3Q18
4Q18
1Q19

1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16

3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
Celcom AIS PLDT Revenue EBITDA

Source: Company, Bloomberg, SAM Research

10
 SAMUEL ASET MANAJEMEN

Domestic Valuation
EV/BEst EBITDA
TLKM EXCL
8.0 10.0
9.0
7.0 8.0
7.0
6.0
6.0
5.0 5.0
4.0
4.0 3.0
2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019

EV/BEst EBITDA STD -1 STD +1 Average EV/BEst EBITDA STD -1 STD +1 Average

ISAT Valuation Spread

6.0 6.0
5.5
4.0
5.0
2.0
4.5
4.0 0.0
3.5 2013 2014 2015 2016 2017 2018 2019
-2.0
3.0
2013 2014 2015 2016 2017 2018 2019 -4.0

EV/BEst EBITDA STD -1 STD +1 Average TLKM-EXCL EXCL-ISAT

Source: Bloomberg, SAM Research

*Data as of 27 June 2019 (first session)
11
 SAMUEL ASET MANAJEMEN

Regional Valuation
EV/BEst EBITDA; revert to the mean
Axiata AIS
11 14
10 12
9
10
8
8
7
6 6

5 4
2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019

EV/Best EBITDA STD -1 STD +1 Average EV/Best EBITDA STD -1 STD +1 Average

EV/BEst EBITDA EV/EBITDA

14 10 3.0
2.0
12 8 1.0
10 0.0
6
-1.0
8
4 -2.0
6 -3.0
2 -4.0
4

2011

2013
2002
2003
2004
2005
2006
2007
2008
2009
2010

2012

2014
2015
2016
2017
2018
2019
2011 2012 2013 2014 2015 2016 2017 2018 2019

Axiata AIS PLDT Bharti Valuation gap ratio TLKM MSCI EM Telecom Services

Source: Bloomberg, SAM Research

*Data as of 27 June 2019
12
 SAMUEL ASET MANAJEMEN

Regional Share Prices Movement

Outperforming its benchmark YTD
Bharti relative performance to BSE India Axiata relative performance to Bursa Malaysia
60% 40%
50% 30%
40% 20%
30%
20% 10%
10% 0%
0% -10%
-10% -20%
-20% -30%
-30%
-40% -40%
-50% -50%
-60% -60%
Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

AIS relative performance to SET PLDT relative performance to PCOMP

40% 30%
30% 20%
20% 10%
0%
10% -10%
0% -20%
-10% -30%
-20% -40%
-50%
-30% -60%
-40% -70%
-50% -80%
Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Source: Bloomberg, SAM Research

*Data as of 27 June 2019
13
 SAMUEL ASET MANAJEMEN

TLKM vs JCI Seasonality

OW in 2Q & 3Q; UW in 1Q & 4Q
Probability of TLKM Outperformance 10.5%
7.0% 7.8%
100% 4.0%
80%

60%
-4.6%
40%
-8.7% -8.7%
20%
-14.6%
0%
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4

Last 5 Years Last 10 Years Last 15 Years Last 20 Years Average Outperformance Return Average Underperfromance Return

Average Probability 7.8%

5.1%
2.7%
74.2% 73.3% 1.3%

-1.2%
33.3% 35.0%
-3.8%
-5.8% -5.6%
Quarter 1 Quarter 2 Quarter 3 Quarter 4

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Expected Outperformance Expected Underperformance

Source: Bloomberg, SAM Research

14
THANK YOU

PT SAMUEL ASET MANAJEMEN

Menara Imperium GF | Jl. H.R. Rasuna Said Kav. 1 Jakarta Selatan 12980

6221 2854 169 62 21 837 03278 marketing@sam.co.id www.sam.co.id