ISAT is doing asset expansion, however they need to overlook their financial capital as well.

Posted by: admin 5 years, 1 month ago

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PT Indosat Ooredoo Tbk (ISAT) has budgeted capital expenditure or capital expenditure (capex) of Rp 10 trillion to build around 4,300 sites this year. The expansion agenda was positively welcomed by analysts even though ISAT still had to pay attention to its financial condition.

Lucky Ariesandi, Analyst at Bahana Sekuritas, said that the ISAT capex of Rp 10 trillion this year is part of the company's capex target of US $ 2 billion over the next three years.

He argues, ISAT free cash flow can be disrupted by an increase in capex that occurs in the next few years. "The increase in capex and low EBITDA margin will make ISAT have a negative free cash flow in the period 2019-2021," he wrote in research March 8.

Niko Margaronis, Analyst at Danareksa Sekuritas, said that because last year it had a net loss of Rp 2.40 trillion, ISAT had to be smart in finding funding so that the business expansion that was carried out would no longer burden its financial performance. ISAT itself issued bonds and sukuk in early March with a value of Rp 2 trillion.

Apart from that, business expansion still needs to be carried out intensively by ISAT so that the demand for better network quality can be fulfilled. Moreover, the level of competition in the telecommunications sector has continued to increase since the sim card re-registration policy was implemented. "If the quality of the network can be improved, the attractiveness of this issuer in the eyes of customers will increase," Niko said on Wednesday (3/13).

For the record, fierce competition in the telecommunications business made ISAT's customer base down 47.3% to 58 million last year. Fortunately, the company's churn rate or charred card rate has decreased and is at the level of 12% until the end of 2018.

Niko recommended holding ISAT shares with a target of IDR 3,100 per share. Lucky's recommendation was also given by Lucky with a target price of Rp 2,850 per share.

Lucky predicts, ISAT's revenue can reach Rp 24.88 trillion this year. However, the company will still experience a net loss of Rp 1.87 trillion.

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