Monday, December 15, 2008

Talk about TLK!

The largest telecommunication company in Indonesia, PT Telekomunikasi Indonesia (NYSE:TLK), with $6B+ in revenue and over $1.2B in profit per year. Growth is measured at 20% YOY right now but will likely reduce with the on coming global recession. The balance sheet is strong with $1B+ cash and less than $900m in total long term debt. No need to go to the debt markets for handouts here. The current market cap is $9.82B with $1.2B in free cash flow. Thus the stock is selling at less than 9x cash flow with over 50% market share of the Indonesian cell phone market. Growth prospects are tremendous for this firm, considering that market penetration stands at only 40% of the Indonesian cell phone market.

What could go wrong? Excluding the major Asian meltdown of 1990s, the Rupiah has traded at most at a 30% discount todays value. Also assume a major slowdown in growth due to global pressures, reducing the growth to nil YOY. Even then, the stock would be trading at approximately 11.7x last years cashflow (9.82B / .84B = 11.7). I'll take it! At least I will buy a piece, and hope that something unfortunate and unrelated does not happen so that I can buy A LOT MORE at a lower price. :)

Transparency: The author purchased TLK at $20.12/share on November 20th and will buy again when it reaches that price point in the future.


Bob said...

I have been following your posts and
appreciate your insight; however I must question your buy of TLK at $16. TLK has traded in the 30's and 40's for most of 2008 and 2007. It hit a low for the day Nov. 21 of $16.57. That day it closed at $17.97 and hasn't seen 16 since...That was one hell of a buy, if you did get it on Nov 21.

Lockstep said...

Too much enthusiasm in the market right now. TLK has jumped over 20% from my purchase price. Closed the position today at $26.55.

The fundamentals on the company have not changed, I plan to go to the sidelines and buy in again at a lower price.