Tiphone Mobile Indonesia (TELE IJ, BUY, TP: IDR1,000) Results Review: Effects Of Acquisition Beginning To Show - Daily Pack 2 April 2014

Tiphone’s IDR10.5trn (+27.9% y-o-y) revenue and IDR295bn (+44.8% y-o-y) earnings in FY13 were in line. Its 4Q13 improved q-o-q, as revenue surged 40.7% to IDR3.5trn and net profit rose 22.2% to IDR91.1bn from higher handset sales. We expect it to do better this year, as it fully realises the Samsung distributor acquisition. We maintain our forecast numbers and BUY call. Our new TP of IDR1,000 reflects 14.5x FY14 P/E, still a discount to its peers which currently trading at 25x FY14 P/E.

¨       Better 4Q13 sales reflect impact of Samsung distributor acquisition. Tiphone Mobile Indonesia (Tiphone)’s revenue surged by 40.7% in 4Q13 to IDR3.5trn (+40.7% q-o-q) and net profit expanded 22.2% q-o-q to IDR91.1bn, partly due to the effects of its acquisition of a Samsung distributor starting to kick in. However, we saw margins eroding during the quarter, as operational and interest expenses increased – both of which were side effects of the acquisition, which was made back in Oct 2013. The company’s 4Q13 EBIT margin decreased to 3.3% from 4.8% in 3Q13, while its net profit margin also dipped to 2.6% from 3% in 3Q13.

¨       Handset sales a future growth catalyst. The company will still focus on its strategy to increase Samsung handset sales. In our view, Samsung will still be the market leader in the mid- to high-end handset market segment. Thus, as Tiphone fully realises its acquisition this year, the company will also ride on the popularity of the Samsung brand as the market leader in handsets. As Samsung launched new models like the Samsung Galaxy S5 in 1Q14, we will also be able to see the impact of new handset model sales in 2Q14. We are also seeing a trend of users shifting to mid-range handsets from low-end ones – which could lead to the ASPs of Samsung phones increasing to USD200-250 in 2014 from USD150 in 2013.

¨       Maintain BUY, with a new TP of IDR1,000. We maintain our BUY call and our forecasts. Tiphone’s outlook remains robust, buoyed by its handset business. We raise our TP to IDR1,000 from IDR900, reflecting a 14.5x FY14 P/E. In comparison, its retail peers are currently trading at an average of a 25x FY14 P/E. The discount to its peers is due to Tiphone’s major business being voucher distribution, which offers lower margins. (Matthew Wibowo)

ON THE PLATTER:

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ACE Hardware (ACES IJ, BUY, TP IDR925) Results Review: Ending FY13 With a Bang

Summarecon Agung (SMRA IJ, BUY, TP IDR1,450) Results Review: Conservative Guidance

Indonesia Economy: Exports Fell By A Smaller Magnitude And Trade Balance Rebounded

FROM TRADING DESK: JCI today is expected to be traded at 4,916.56 and 4,848.28.

MEDIA HIGHLIGHTS:

Media Nusantara FY13 earnings came in at IDR1.7trn (+2.0% y-o-y), below expectation

Semen Indonesia estimates 1Q14 sales to increase 10% y-o-y

Ministry of Industry may revoke LCGC incentive

BIPI sold 27.4% of ELSA’s shares amounting to IDR395/share

Best regards,

RHB OSK Indonesia Research Institute