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Monday April 23, 2012
Telkom: Call on Indonesia
by Yiannis Mostrous, editor Global Investment Strategist The Asian telecom sector offer solid growth and sustainable dividends, providing investors refuge from economic worries and market volatility. Portfolio holding PT Telekomunikasi Indonesia (TLK), known as Telkom Indonesia, is one of our favorites for long-term growth. Indonesia has the fourth-largest population in the world of any country. It is home to over 50 million Internet users and the world’s third-largest market for Facebook. Indonesia is a global growth leader and should remain so throughout 2012, because of its political stability, high consumer base and a thriving economy driven by manufacturing, construction and tourism. According to the iGR consultancy, the total number of global mobile subscribers will reach approximately 7 billion by 2015, with Asia accounting for 65 percent of the total. It’s the perfect environment for a well-positioned company such as Telkom Indonesia. Last year, cellular subscribers reached the 250 million mark.Telkom Indonesia’s subsidiary Telkomsel is the market leader in cellular, with more than 104 million customers. Management is proposing an increase in the stock’s dividend payout ratio from 50 percent to 65 percent for 2011, and a steady increase from 2012 onward. The company’s solid cash flows and low debt levels will help the company’s case when regulators review the proposal. The government still owns close to 53 percent of Telkom Indonesia and has a say in major management decisions. Telkom Indonesia’s stock has returned about 83 percent (including dividends) since we recommended it at the end of 2008. The stock still trades at a reasonable valuation of 11.7 times expected earnings. The shares offer a 5 percent dividend yield, with a 3 percent share buyback program. We continue to rate the stock a buy up to $40. Learn more about this financial newsletter at Yiannis Mostrous, editor Global Investment Strategist. Related articles: 
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