Should Telkom do IPO for Telkomsel ?

Abstract

: The objective of this research is to estimate the fair value of Telkomsel share price in the initial public offering plan using FCFF and DDM approach with the verification of the result by using Relative Valuation method with the PBV approach and Price to Earnings Ratio. This research used three scenarios, namely the pessimistic, the moderate, and the optimistic, with historical financial data from 2012-2017 used as the baseline for projections for 2018 – 2022 conditions. Outcomes from this research show that by using the DCF-FCFF method in every one of the three scenarios, Telkomsel’s value is in the range of 80% to 93% of Telkom’s (TLKM.ID) Market Price. Comparison with DDM valuation shows the FCFF valuation range extend in an acceptable range - on the other side, relative valuation method used is the PER and PBV approach, where the calculation for Telkomsel PBV is above Telco Industry market range and Telkomsel PER value is still within market range.