0 Indosat Shares Drop as 2012 Profit Plunges By Over 50%

Shares of Indosat, one of Indonesia’s largest telecommunications providers, fell on Tuesday after reporting that profit dropped by more than half in 2012. In a statement on Monday, Indosat announced that its net income fell 53 percent to Rp 417.4 billion ($43 million) last year, from Rp 879.7 billion a year earlier. Meanwhile, its revenue rose 10 percent to Rp 22.72 trillion from Rp 20.58 trillion in 2011. The company’s shares fell 0.8 percent to Rp 6,550, exceeding the 0.2 percent decline of the benchmark stock index, which erased some of its 7.2 percent gain in the previous four days. 

Kim Eng Securities, in a note to clients on Tuesday, said the profit decline was “mostly because of adjustment on recognition of gain from tower sales and a Rp 695 billion loss on foreign exchange.” Indosat said in the statement it provisionally made a one-time gain valued at Rp 2.19 trillion from the sale and lease of 2,500 towers in the third quarter last year. That one-time gain was, however, hurt by foreign exchange losses and other expenses due to the rupiah weakening in the fourth quarter, which eroded the company’s full-year profit. 

Indosat’s revenue from its cellular business rose 12 percent last year supported by a 13 percent increase in the number of subscribers to 58.5 million by the end of 2012. Still, its average revenue per user, an indicator in cellular business, fell 2 percent to Rp 27,800. Kim Eng said the revenue and EBIT was within their expectations. “The company managed to show higher revenue in 4Q12. This is quite an achievement as typically the third quarter will be the peak due to the Islamic Eid festivities. 

Successful campaigns and distribution improvements are key to increased net adds. The company also shows improving churn trend,” the securities firm said. Kim Eng maintains buy recommendation for Indosat’s stock with a target price of Rp 7,350 per shares. The decline in net income will be an added challenge amid increasingly tighter competition, eTrading Securities said. “Looking forward, hopefully the company can have some efficiencies in its expenses. Meanwhile, the company’s plan to focus on data business can be a support to its financial performance ahead,” eTrading said in a quick commentary note on the earnings Tuesday.

In comparison, XL Axiata, Indosat’s closest competition, posted a narrower decline in net income. XL’s net income for 2012 was Rp 2.74 trillion, down 3.2 percent from Rp 2.83 trillion a year earlier.

source : the jakarta globe