Intrinsic value of Telekomunikasi Indonesia ADR - TLK

Previous Close

$35.45

  Intrinsic Value

$56.56

stock screener

  Rating & Target

str. buy

+60%

  Value-price divergence*

0%

Previous close

$35.45

 
Intrinsic value

$56.56

 
Up/down potential

+60%

 
Rating

str. buy

 
Value-price divergence*

0%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TLK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 35.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.53
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
Revenue, $m
  8,686
  9,780
  10,938
  12,159
  13,440
  14,783
  16,185
  17,648
  19,172
  20,758
  22,407
  24,121
  25,902
  27,753
  29,677
  31,677
  33,756
  35,920
  38,171
  40,515
  42,957
  45,501
  48,155
  50,923
  53,812
  56,829
  59,980
  63,274
  66,717
  70,319
  74,086
Variable operating expenses, $m
 
  4,978
  5,567
  6,188
  6,839
  7,522
  8,235
  8,980
  9,755
  10,561
  11,400
  12,269
  13,175
  14,116
  15,095
  16,112
  17,170
  18,270
  19,415
  20,607
  21,849
  23,143
  24,493
  25,901
  27,371
  28,905
  30,508
  32,183
  33,935
  35,766
  37,683
Fixed operating expenses, $m
 
  1,405
  1,440
  1,476
  1,513
  1,551
  1,590
  1,630
  1,670
  1,712
  1,755
  1,799
  1,844
  1,890
  1,937
  1,986
  2,035
  2,086
  2,138
  2,192
  2,247
  2,303
  2,360
  2,419
  2,480
  2,542
  2,605
  2,670
  2,737
  2,806
  2,876
Total operating expenses, $m
  5,761
  6,383
  7,007
  7,664
  8,352
  9,073
  9,825
  10,610
  11,425
  12,273
  13,155
  14,068
  15,019
  16,006
  17,032
  18,098
  19,205
  20,356
  21,553
  22,799
  24,096
  25,446
  26,853
  28,320
  29,851
  31,447
  33,113
  34,853
  36,672
  38,572
  40,559
Operating income, $m
  2,925
  3,397
  3,931
  4,495
  5,088
  5,709
  6,360
  7,039
  7,747
  8,484
  9,252
  10,053
  10,884
  11,747
  12,645
  13,579
  14,552
  15,564
  16,618
  17,716
  18,861
  20,055
  21,301
  22,603
  23,962
  25,382
  26,867
  28,420
  30,046
  31,747
  33,528
EBITDA, $m
  2,925
  4,377
  5,026
  5,711
  6,432
  7,188
  7,978
  8,803
  9,663
  10,559
  11,491
  12,461
  13,469
  14,517
  15,607
  16,741
  17,921
  19,148
  20,427
  21,759
  23,148
  24,596
  26,107
  27,685
  29,332
  31,054
  32,853
  34,735
  36,704
  38,764
  40,922
Interest expense (income), $m
  -258
  69
  99
  130
  163
  197
  234
  272
  311
  352
  395
  440
  486
  534
  584
  636
  690
  746
  805
  866
  929
  995
  1,064
  1,135
  1,210
  1,288
  1,370
  1,455
  1,544
  1,637
  1,734
Earnings before tax, $m
  2,850
  3,328
  3,833
  4,365
  4,925
  5,512
  6,126
  6,767
  7,436
  8,132
  8,857
  9,614
  10,398
  11,213
  12,061
  12,943
  13,861
  14,817
  15,813
  16,850
  17,932
  19,060
  20,238
  21,467
  22,752
  24,094
  25,497
  26,965
  28,502
  30,110
  31,794
Tax expense, $m
  674
  899
  1,035
  1,179
  1,330
  1,488
  1,654
  1,827
  2,008
  2,196
  2,391
  2,596
  2,807
  3,028
  3,256
  3,495
  3,743
  4,001
  4,269
  4,550
  4,842
  5,146
  5,464
  5,796
  6,143
  6,505
  6,884
  7,281
  7,695
  8,130
  8,584
Net income, $m
  1,443
  2,430
  2,798
  3,186
  3,595
  4,024
  4,472
  4,940
  5,428
  5,936
  6,465
  7,018
  7,590
  8,185
  8,805
  9,449
  10,119
  10,817
  11,543
  12,301
  13,090
  13,914
  14,774
  15,671
  16,609
  17,589
  18,613
  19,685
  20,806
  21,980
  23,209

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,332
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  13,391
  12,459
  13,934
  15,489
  17,121
  18,831
  20,618
  22,482
  24,423
  26,443
  28,544
  30,727
  32,996
  35,355
  37,805
  40,353
  43,002
  45,758
  48,625
  51,611
  54,722
  57,964
  61,344
  64,870
  68,550
  72,394
  76,408
  80,604
  84,990
  89,578
  94,377
Adjusted assets (=assets-cash), $m
  11,059
  12,459
  13,934
  15,489
  17,121
  18,831
  20,618
  22,482
  24,423
  26,443
  28,544
  30,727
  32,996
  35,355
  37,805
  40,353
  43,002
  45,758
  48,625
  51,611
  54,722
  57,964
  61,344
  64,870
  68,550
  72,394
  76,408
  80,604
  84,990
  89,578
  94,377
Revenue / Adjusted assets
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
Average production assets, $m
  8,668
  9,761
  10,917
  12,134
  13,413
  14,753
  16,153
  17,613
  19,134
  20,716
  22,362
  24,073
  25,850
  27,698
  29,618
  31,614
  33,689
  35,848
  38,095
  40,434
  42,871
  45,410
  48,058
  50,821
  53,704
  56,715
  59,860
  63,147
  66,584
  70,178
  73,938
Working capital, $m
  593
  -978
  -1,094
  -1,216
  -1,344
  -1,478
  -1,619
  -1,765
  -1,917
  -2,076
  -2,241
  -2,412
  -2,590
  -2,775
  -2,968
  -3,168
  -3,376
  -3,592
  -3,817
  -4,051
  -4,296
  -4,550
  -4,815
  -5,092
  -5,381
  -5,683
  -5,998
  -6,327
  -6,672
  -7,032
  -7,409
Total debt, $m
  2,374
  2,817
  3,711
  4,653
  5,643
  6,679
  7,761
  8,891
  10,067
  11,291
  12,564
  13,888
  15,263
  16,692
  18,177
  19,721
  21,326
  22,996
  24,734
  26,543
  28,428
  30,393
  32,441
  34,578
  36,809
  39,137
  41,570
  44,113
  46,771
  49,551
  52,460
Total liabilities, $m
  7,107
  7,550
  8,444
  9,386
  10,376
  11,412
  12,494
  13,624
  14,800
  16,024
  17,297
  18,621
  19,996
  21,425
  22,910
  24,454
  26,059
  27,729
  29,467
  31,276
  33,161
  35,126
  37,174
  39,311
  41,542
  43,870
  46,303
  48,846
  51,504
  54,284
  57,193
Total equity, $m
  6,284
  4,909
  5,490
  6,103
  6,746
  7,420
  8,123
  8,858
  9,623
  10,419
  11,246
  12,107
  13,001
  13,930
  14,895
  15,899
  16,943
  18,028
  19,158
  20,335
  21,560
  22,838
  24,169
  25,559
  27,009
  28,523
  30,105
  31,758
  33,486
  35,294
  37,185
Total liabilities and equity, $m
  13,391
  12,459
  13,934
  15,489
  17,122
  18,832
  20,617
  22,482
  24,423
  26,443
  28,543
  30,728
  32,997
  35,355
  37,805
  40,353
  43,002
  45,757
  48,625
  51,611
  54,721
  57,964
  61,343
  64,870
  68,551
  72,393
  76,408
  80,604
  84,990
  89,578
  94,378
Debt-to-equity ratio
  0.378
  0.570
  0.680
  0.760
  0.840
  0.900
  0.960
  1.000
  1.050
  1.080
  1.120
  1.150
  1.170
  1.200
  1.220
  1.240
  1.260
  1.280
  1.290
  1.310
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.400
  1.410
Adjusted equity ratio
  0.364
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,443
  2,430
  2,798
  3,186
  3,595
  4,024
  4,472
  4,940
  5,428
  5,936
  6,465
  7,018
  7,590
  8,185
  8,805
  9,449
  10,119
  10,817
  11,543
  12,301
  13,090
  13,914
  14,774
  15,671
  16,609
  17,589
  18,613
  19,685
  20,806
  21,980
  23,209
Depreciation, amort., depletion, $m
  0
  979
  1,095
  1,217
  1,345
  1,478
  1,618
  1,764
  1,917
  2,075
  2,239
  2,407
  2,585
  2,770
  2,962
  3,161
  3,369
  3,585
  3,809
  4,043
  4,287
  4,541
  4,806
  5,082
  5,370
  5,672
  5,986
  6,315
  6,658
  7,018
  7,394
Funds from operations, $m
  2,646
  3,409
  3,893
  4,403
  4,940
  5,502
  6,090
  6,704
  7,345
  8,011
  8,705
  9,425
  10,175
  10,955
  11,766
  12,610
  13,488
  14,401
  15,353
  16,344
  17,377
  18,455
  19,579
  20,753
  21,979
  23,260
  24,599
  26,000
  27,465
  28,998
  30,603
Change in working capital, $m
  -880
  -109
  -116
  -122
  -128
  -134
  -140
  -146
  -152
  -159
  -165
  -171
  -178
  -185
  -192
  -200
  -208
  -216
  -225
  -234
  -244
  -254
  -265
  -277
  -289
  -302
  -315
  -329
  -344
  -360
  -377
Cash from operations, $m
  3,526
  3,518
  4,008
  4,525
  5,068
  5,636
  6,231
  6,851
  7,497
  8,170
  8,870
  9,597
  10,353
  11,140
  11,959
  12,810
  13,696
  14,618
  15,578
  16,579
  17,622
  18,709
  19,845
  21,030
  22,268
  23,562
  24,914
  26,329
  27,809
  29,358
  30,980
Maintenance CAPEX, $m
  0
  -867
  -976
  -1,092
  -1,213
  -1,341
  -1,475
  -1,615
  -1,761
  -1,913
  -2,072
  -2,236
  -2,407
  -2,585
  -2,770
  -2,962
  -3,161
  -3,369
  -3,585
  -3,809
  -4,043
  -4,287
  -4,541
  -4,806
  -5,082
  -5,370
  -5,672
  -5,986
  -6,315
  -6,658
  -7,018
New CAPEX, $m
  -2,182
  -1,093
  -1,156
  -1,218
  -1,279
  -1,340
  -1,400
  -1,460
  -1,521
  -1,583
  -1,646
  -1,711
  -1,778
  -1,847
  -1,920
  -1,996
  -2,075
  -2,159
  -2,247
  -2,339
  -2,437
  -2,540
  -2,648
  -2,763
  -2,883
  -3,011
  -3,145
  -3,287
  -3,436
  -3,594
  -3,760
Cash from investing activities, $m
  -2,058
  -1,960
  -2,132
  -2,310
  -2,492
  -2,681
  -2,875
  -3,075
  -3,282
  -3,496
  -3,718
  -3,947
  -4,185
  -4,432
  -4,690
  -4,958
  -5,236
  -5,528
  -5,832
  -6,148
  -6,480
  -6,827
  -7,189
  -7,569
  -7,965
  -8,381
  -8,817
  -9,273
  -9,751
  -10,252
  -10,778
Free cash flow, $m
  1,468
  1,559
  1,877
  2,216
  2,575
  2,955
  3,356
  3,775
  4,215
  4,674
  5,152
  5,650
  6,168
  6,708
  7,269
  7,852
  8,459
  9,090
  9,746
  10,430
  11,141
  11,883
  12,656
  13,462
  14,303
  15,181
  16,098
  17,056
  18,058
  19,106
  20,202
Issuance/(repayment) of debt, $m
  -230
  849
  894
  942
  989
  1,036
  1,083
  1,129
  1,176
  1,224
  1,273
  1,323
  1,375
  1,429
  1,485
  1,544
  1,605
  1,670
  1,738
  1,809
  1,885
  1,964
  2,048
  2,137
  2,230
  2,329
  2,433
  2,543
  2,658
  2,780
  2,909
Issuance/(repurchase) of shares, $m
  243
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -500
  849
  894
  942
  989
  1,036
  1,083
  1,129
  1,176
  1,224
  1,273
  1,323
  1,375
  1,429
  1,485
  1,544
  1,605
  1,670
  1,738
  1,809
  1,885
  1,964
  2,048
  2,137
  2,230
  2,329
  2,433
  2,543
  2,658
  2,780
  2,909
Total cash flow (excl. dividends), $m
  960
  2,408
  2,771
  3,158
  3,565
  3,992
  4,438
  4,905
  5,391
  5,898
  6,425
  6,973
  7,544
  8,137
  8,754
  9,396
  10,064
  10,760
  11,484
  12,239
  13,026
  13,847
  14,704
  15,598
  16,533
  17,509
  18,530
  19,598
  20,716
  21,886
  23,110
Retained Cash Flow (-), $m
  -689
  -551
  -581
  -612
  -643
  -674
  -704
  -734
  -765
  -796
  -828
  -860
  -894
  -929
  -966
  -1,004
  -1,044
  -1,086
  -1,130
  -1,176
  -1,226
  -1,277
  -1,332
  -1,389
  -1,450
  -1,514
  -1,582
  -1,653
  -1,728
  -1,807
  -1,891
Prev. year cash balance distribution, $m
 
  1,926
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,783
  2,189
  2,545
  2,921
  3,318
  3,734
  4,171
  4,626
  5,102
  5,598
  6,113
  6,649
  7,208
  7,788
  8,392
  9,021
  9,674
  10,354
  11,063
  11,801
  12,570
  13,372
  14,209
  15,083
  15,995
  16,949
  17,945
  18,988
  20,078
  21,219
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  3,627
  2,004
  2,215
  2,405
  2,572
  2,710
  2,818
  2,892
  2,931
  2,935
  2,903
  2,838
  2,741
  2,615
  2,464
  2,292
  2,105
  1,907
  1,703
  1,500
  1,300
  1,110
  931
  768
  622
  494
  385
  294
  219
  160
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

PT Telekomunikasi Indonesia Tbk engages in telecommunications, information, and media and edutainment businesses worldwide. It offers fixed wireline telecommunications services, pay TV, and data and Internet services to home customers; mobile cellular and fixed wireless telecommunications services to individual customers; intelligent network and related services, cable television, and VoIP services; and earth station satellite up linking and down linking services, as well as leases satellite transponders capacity to broadcasters and operators, and space to other operators. The company provides information and communications technology platform that include enterprise connectivity, including fixed voice, fixed broadband, IP-VPN, lease channel, Ethernet, and managed network solutions; IT services, including system integration, IT outsourcing, premises integration, and professional services; business process outsourcing services; hardware sales/support; and data center and cloud services, as well as smart enabler platform that offers payment, digital advertising, and big data solutions. PT Telekomunikasi Indonesia Tbk, through its subsidiaries, engages in the provision of the telecommunication construction services; leasing offices; building management and maintenance services; civil consulting and developing services; data and information service in the form of print and electronic media, and call center services; network and e-commerce services; health insurance and administration services; property development and management; and tourism services, as well as operates pharmacies and laboratories. As of December 31, 2015, it had 152.6 million cellular subscribers, 10.3 million subscribers on its fixed wireline network, and 47.8 million broadband subscribers. The company was founded in 1884 and is headquartered in Bandung, Indonesia.

FINANCIAL RATIOS  of  Telekomunikasi Indonesia ADR (TLK)

Valuation Ratios
P/E Ratio 4867.3
Price to Sales 808.6
Price to Book 1117.7
Price to Tangible Book
Price to Cash Flow 1991.9
Price to Free Cash Flow 5225.8
Growth Rates
Sales Growth Rate 13.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.4%
Cap. Spend. - 3 Yr. Gr. Rate 6.8%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 31.3%
Total Debt to Equity 37.8%
Interest Coverage -10
Management Effectiveness
Return On Assets 9.7%
Ret/ On Assets - 3 Yr. Avg. 9.4%
Return On Total Capital 17.1%
Ret/ On T. Cap. - 3 Yr. Avg. 16.5%
Return On Equity 24.3%
Return On Equity - 3 Yr. Avg. 22.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 70.4%
Gross Margin - 3 Yr. Avg. 69.7%
EBITDA Margin 29.8%
EBITDA Margin - 3 Yr. Avg. 29.2%
Operating Margin 33.7%
Oper. Margin - 3 Yr. Avg. 32.6%
Pre-Tax Margin 32.8%
Pre-Tax Margin - 3 Yr. Avg. 31.7%
Net Profit Margin 16.6%
Net Profit Margin - 3 Yr. Avg. 15.9%
Effective Tax Rate 23.6%
Eff/ Tax Rate - 3 Yr. Avg. 25%
Payout Ratio 58%

TLK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TLK stock intrinsic value calculation we used $8686 million for the last fiscal year's total revenue generated by Telekomunikasi Indonesia ADR. The default revenue input number comes from 2016 income statement of Telekomunikasi Indonesia ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TLK stock valuation model: a) initial revenue growth rate of 12.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TLK is calculated based on our internal credit rating of Telekomunikasi Indonesia ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Telekomunikasi Indonesia ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TLK stock the variable cost ratio is equal to 50.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1371 million in the base year in the intrinsic value calculation for TLK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Telekomunikasi Indonesia ADR.

Corporate tax rate of 27% is the nominal tax rate for Telekomunikasi Indonesia ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TLK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TLK are equal to 99.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Telekomunikasi Indonesia ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TLK is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6284 million for Telekomunikasi Indonesia ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1004.19 million for Telekomunikasi Indonesia ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Telekomunikasi Indonesia ADR at the current share price and the inputted number of shares is $35.6 billion.

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COMPANY NEWS

▶ Where the Bulls Run Fastest: Emerging Stock Markets   [Jun-02-17 06:00AM  Investopedia]
▶ Telkom Indonesia Earnings: It's All About the Data Customer   [Nov-14-16 04:28PM  at Motley Fool]
▶ VICE Media Announces Launch of VICE Indonesia   [Nov-08-16 03:48PM  ACN Newswire]
▶ [$$] BlackBerry Juices Indonesia's Plans to Grow Smartphone Supply Chain   [Oct-16-16 06:46AM  at The Wall Street Journal]
▶ [$$] If You're Hot for Pokemon Go Then Look Over Here   [Jul-28-16 12:01AM  at Barrons.com]
▶ Telkom Indonesia's 2015 Annual Report on Form 20-F   [Jun-17-16 11:37AM  PR Newswire]
▶ How Did Telkom Indonesia Do in 2015?   [Apr-14-16 03:49PM  at Motley Fool]
▶ Can Netflix, Inc. Overcome This New Threat in Indonesia?   [Apr-01-16 03:41PM  at Motley Fool]
▶ [$$] Indonesia Puts Squeeze on Foreign Tech Companies   [07:54AM  at The Wall Street Journal]
▶ Uzone.id Launches Newly Redesigned Web Interface   [Feb-19-16 07:27PM  ACN Newswire]
▶ Why Facebook Just Crushed Earnings Tech Roundup   [Jan-27-16 06:15PM  at TheStreet]
▶ Netflix in Indonesia just hit a major barrier   [07:32AM  at MarketWatch]
▶ Here is What Hedge Funds Think About Analog Devices, Inc. (ADI)   [Dec-01  10:41AM  at Insider Monkey]
▶ Here Is What Hedge Funds Think About Tyson Foods, Inc. (TSN)   [Nov-27  03:14AM  at Insider Monkey]
▶ Hedge Funds Turning The Lights Out On Spectra Energy Corp. (SE)   [Nov-21  03:16PM  at Insider Monkey]
▶ Syniverse Extends LTE Roaming Reach for Telin   [Oct-01  04:00AM  Business Wire]
▶ A Telecom Stock That Can Rise 30% in the Next Year   [Jul-29  09:40PM  at Barrons.com]
▶ Profit From Smartphone Boom in Indonesia   [Feb-25  12:01AM  at Barrons.com]
Stock chart of TLK Financial statements of TLK
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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