Discounted Cash Flow Valuation of Indonesian Telecommunication Stocks: Investment Implications for PT Lembur Sadaya Investama

Abstract

Background: The telecommunications sector in Indonesia has experienced rapid growth driven by increasing internet penetration and expanding digital infrastructure. The rising demand for mobile data services has strengthened the role of telecommunications companies as key enablers of the national digital economy.
Purpose: This study aims to estimate the intrinsic value of telecommunication companies listed on the Indonesia Stock Exchange using the Discounted Cash Flow (DCF) method to support investment decision-making.
Design/Methodology/Approach: This study employs a fundamental valuation approach using the Free Cash Flow to Firm (FCFF) model. Financial data from 2017–2023 were obtained from audited annual reports of PT Telekomunikasi Indonesia Tbk (TLKM), PT Indosat Tbk (ISAT), and PT XL Axiata Tbk (EXCL). Future cash flows were projected based on historical financial performance and discounted using the Weighted Average Cost of Capital (WACC).
Findings/Result: The valuation results indicate that the intrinsic values of TLKM, ISAT, and EXCL are estimated at Rp 4,047, Rp 14,281, and Rp 2,801 per share, respectively. These values exceed their corresponding market prices at the time of analysis, indicating that the stocks are undervalued.
Conclusion: The findings suggest that telecommunications stocks in Indonesia offer potential long-term investment opportunities.
Originality/Value: This study provides empirical evidence on the intrinsic valuation of Indonesian telecommunication stocks using an FCFF-based DCF framework.

Keywords: discounted cash flow, intrinsic value, investment decision, stock valuation, telecommunication industry