ASIA’S STEALTH TIGER

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Here’s why I think this week’s Global Bull Market Alert pick, tongue-twister Perusahaan Perseroan Perseropt PTelekomunikasi Indonesia tbk (TLK) is the best way to profit from this undervalued and under covered Global Bull market.

First, as Indonesia’s leading telecommunications group, TLK has a market-leading 12.4 million fixed-line telephone subscribers. In addition, TLK owns 65% of Telkomsel, the country’s largest cell phone provider. A revealing statistic: the number of its cellular subscribers, having recently reached 23.5 million, is now double that of fixed-line subscribers. And this number is expected to grow by a whopping 40% just this year. There is certainly plenty of room for growth: Indonesia’s wireless penetration rate is 13%, compared with 25% in China and 41% in the Philippines.

Second, TLK revenues and profits are growing by leaps and bounds. Net profit last quarter increased a whopping 94% on a 26% jump in its consolidated revenue. Revenue in its cell phone business alone grew 49%. And TLK’s EBITDA margin of 72% is one of the highest in the world and its operating margins of almost 42% trounce industry rivals. Given its growth prospects, TLK is surprisingly cheap. With a PEG (price-earnings to growth) ratio of .85, it’s one of the best telco buys on the globe.

Finally, the Indonesian stock market has embarked on a steady upward ascent this year after treading water for most of the last two years. And it’s particularly a great time to be a U.S. investor in Indonesia. The appreciation of Indonesia’s currency, the rupiah, is boosting the returns for U.S. dollar-based investors significantly. TLK itself recently more than quadrupled its foreign currency gains thanks to the stronger rupiah.

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So buy TLK today at market and place your stop at $30.40. I recommend the October $35 calls if you want to play the options (TLKJG.X). But be careful, as they are thinly traded.

PORTFOLIO UPDATE

Bank of America last week upgraded Chartered Semiconductor (CHRT) with a target price of $19.60. That’s a whopping 70% higher than its closing price on Friday. But with CHRT options up 63% in two short weeks, take half your profits to lock in some super-quick profits. Hold onto the stock and your remaining options for potentially even higher gains.

Your shares in Millicom International (MICC) skyrocketed almost 8% (with the options up more than 60%!) on Friday after it was announced that five bidders are left in the running for MICC’s takeover. The bids are reported to be all around $54, already a premium of almost 17% compared with our purchase price three weeks ago. With almost half a dozen bidders left at this stage, the final price will almost certainly go even higher. So hold onto both your stocks and options for now. Look for the deal to close around mid-May.

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With global infrastructure play ABB Ltd. (ABB) soaring 16% to $14.40 and with the options up just under 60%, you should sell half your options to lock in some profits. Hold onto the stock, though: Swiss investment house Vontobel just upped its price target on the stock to $17.30 on the back of ABB's 30% increase in operating profits. Move your stop to $13.40.

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