OCD Stock Pick #3: TLK

This is the third in a series of stock picks for the stock pickers suffering from OCD who MUST go long in the world's most dangerous bear market...

As an OCD investor, to protect yourself from your ways, your only chance is purchasing at the correct time. In this time of economic turmoil, for an investor, OCD or otherwise, not to demand a discount due to unforeseen events is reckless.

Thus the author recommends previous pick that can be recycled for the OCD amongst us.

The author previously bought at $20.12 on November 20th, 2008 and recently sold at $26.55. Since that time, there is absolutely no significant news related to the company, positive or negative. The stock has risen and fallen with general market swings.

In the previous analysis the risk factors were the following:

1) Global market conditions
2) Currency risk

Since that time the IDR (Indonesian Rupiah) has actually strengthend 5% versus the USD. The oil prices have stablized, which probably provides a significant amount of support for the IDR.

The author recommends buying TLK again at a value discount of $19/share (9.34B market cap) and 11.1x FY2008 cashflow. (9.34B / .84B = 11.1)

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.