Fitch Ratings has revised the outlook on Indonesia-based PT Indosat Tbk's (Indosat) long term local currency issuer default rating (IDR) to positive from stable.
Indosat's long-term foreign and local curreny IDRs have been affirmed at BBB- respectively. The outlook on the FC IDR is Stable. The agency has also affirmed Indosat's senior unsecured rating at BBB-. The outlook change reflects the improvement of Indosat's credit profile during FY10 and Fitch's expectations for the improvement to continue in FY11. During FY10 Indosat recorded a 5.2% and 9.7% y-o-y increase in its revenue and EBITDA, respectively, and improved its EBITDA margins by 200bps to 48.6%.
Net debt adjusted for lease equivalent debt fell to IDR27.3trn from Rp29.6 trillion during the same period, taking the company's leverage ratio (lease-adjusted net debt to funds flow from operations) lower to 2.4x from 3.3x.
Further deleveraging is likely, as for the first time in 2011 Fitch expects the company to cover capex requirements from its cash flow from operations.
The agency also expects Indosat will maintain its EBITDA margins for FY11 (excluding one-off costs related to its voluntary separation scheme) given management's focus on profitability and that competition in the wireless industry in Indonesia is likely to remain subdued for the rest of 2011.
Disclosure: No position at the stock mentioned above.
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