TLKM: Downbeat earnings on TO unrealized loss

TLKM's 9M22 net profit contracted 12.1% yoy to IDR16.58 tn, accounting for 61.3%/ 63.2% of ours/consensus estimates*. Bottom-line pressure was following its soft top line that eked out a growth of 2.7% yoy/0.3% qoq to IDR106.04 tn/ IDR36.6 tn, representing 71.9%/72.3% of ours/consensus estimates, on the back of relatively flattish data revenue growth qoq and continued contractions of legacy services as well as network & other tele business. On the other hand, TLKM's costs surged 15.6% qoq mostly due to unrealized loss on TO investment fair value that resulted in OPM sliding to 23.4% in 3Q22 vs. 33.5% in 2Q22. Nevertheless, EBITDA margin stood at 54.2% in 3Q22, or relatively stable qoq. Meanwhile, TLKM's B/S remains robust with manageable 0.28x net gearing in 9M22. Telkomsel's number of subs was down by 5.8% qoq although, ARPU was improved +2.3% YoY qoq in 3Q22 , respectively. (Source: Company) Comment: As we are waiting for the management's call, we opine that TLKM's soft top line result was mostly dragged down by its mobile data amid persistently stiff competition. This was reflected by data yield contraction of -9.9% qoq in 3Q22.