Jakarta. Telkom Indonesia (TLKM) stocks have faced significant pressure this year, experiencing an 18.9 percent decrease in value to Rp 3,200 ($0.2). According to Reza Priyambada, an investment consultant at Reliance Sekuritas Indonesia, this decline in Telkom's stock price is primarily due to investment losses in tech company Goto Gojek Tokopedia (GOTO) stocks.

The state-owned telecommunication company's stock performance has been worse than the Composite Stock Price Index of the Indonesia Stock Exchange (IDX) as well as other blue-chip companies. Throughout 2024, the blue-chip LQ45 index only dropped by 3.6 percent, while the IDX fell by 1.48 percent.

TLKM stocks declined further by 0.32 percent to Rp 3,140 at the beginning of trading this week.

With continuously declining performance, Telkom's market capitalization is now at Rp 319 trillion ($19.68 billion), placing it in the eighth position. Last year, Telkom was among the top five companies in market capitalization on the IDX. The surge in Barito Group stocks, especially Barito Renewables Energy (BREN) and Chandra Asri Pacific (TPIA), along with the strong penetration of Amman Mineral Internasional (AMMN), has caused Telkom's position to decline.

Reza Priyambada considers Telkomsel's, Telkom's cellular telecommunication provider division, investment in GOTO stocks to be one of the negative sentiments affecting Telkom's stocks. Telkomsel's total investment in GOTO is around Rp 8.8 trillion. In 2023, Telkomsel's unrealized losses from its investment in GOTO amounted to Rp 119 billion. In the previous year, this investment loss reached Rp 6.7 trillion, bringing the accumulated loss to around Rp 6.8 trillion.

These losses occurred as the price of GOTO stocks declined from Rp 375 in 2021 to Rp 86 at the end of 2023. As of 2024, the price of GOTO stocks has continued to plummet, reaching Rp 62.

Previously in 2023, Telkom recorded revenue of Rp 149 trillion, up from Rp 147 trillion in 2022. Net profit reached Rp 24.5 trillion, up from Rp 20.7 trillion. Telkom's equity reached Rp 156 trillion, while liabilities amounted to Rp 130.4 trillion. Telkom's total assets reached Rp 287 trillion, up from Rp 275 trillion previously. Telkom generated net cash from operations of Rp 60.5 trillion, down from Rp 73 trillion. The company's cash and cash equivalents amounted to Rp 29 trillion, down from Rp 31.9 trillion.

According to Reza, TLKM stocks have been in a downward trend since the end of last month, after the company released its 2023 financial report. Overall, Telkom's performance is below market expectations. In addition, investors also consider the company's investment in GOTO to be unprofitable, leading them to sell TLKM stocks, and causing the price to drop.

This reaction, according to him, is quite reasonable considering that GOTO stocks are still in the red and show no signs of improvement.

"If we look at TLKM's book value, their investment in GOTO is actually affordable, but again, market reactions differ," said Reza on Monday.

Macquarie, an investment bank from Australia, believes that the market also responded negatively to the launch of Telkomsel Lite. This product could reignite a cheap tariff war among telecommunications operators, which could erode margins.

Macquarie believes that Telkom will face many challenges. Therefore, Macquarie has lowered its revenue and EBITDA projections for Telkom by 7 percent-9 percent and 11 percent respectively for 2024-2026.

However, BRI Danareksa Sekuritas (BRIDS) remains bullish on Telkom's performance. In the first quarter of 2024, Telkom's revenue remained consistent with seasonal trends, achieving 24 percent of the estimated revenue for the full year 2024. Telkom's combined revenue from legacy services and data/internet remained resilient in the first quarter of 2024, reaching Rp 24.7 trillion, which was a decrease of 4.2 percent compared to the previous quarter but an increase of 3.1 percent compared to the same period last year.

"We believe that the significant de-rating of TLKM to its current 3.9x EV/EBITDA is unjustified. We maintain our Overweight (OW) rating on the sector as we believe that Telkom Indonesia has successfully defended its market share and delivered earnings in line with expectations in the first quarter of 2024," BRIDS said in its report on Monday.

BRIDS recommended "buy" for TLKM shares with a target price of Rp4,400.