KUALA LUMPUR – AmInvestment Bank Bhd anticipates Telekom Malaysia (TM) to post strong financial results for the first quarter of 2021 (Q1 2021), given the group’s continued cost optimisation initiatives and lumpy sale of indefeasible rights of use of wholesale submarine connectivity.
In a research note today, AmInvestment said it is maintaining its “buy” call on TM, with an unchanged discounted cash flow-based fair value of RM7.10 per share.
“Our forecasts are unchanged following our recent discussions with the management. As an indication of the wide variation in the past, Q1 accounted for between 17% to 30% of financial year (FY) 2018 to FY20 normalised net profit,” it said.
Meanwhile, the research house said the proposed Celcom-Digi merger is unlikely to substantively affect TM’s earnings, given that Unifi Mobile does not significantly contribute to the group’s revenue at this stage.
“Although TM does not provide any subscriber details, we understand that earnings before tax and interest of Unifi Mobile was slightly positive and continued to fare well in Q1FY21.
“While the forecast for FY21 revenue growth is expected to be flat or to post low single-digit, it would be supported by strong Unifi compound annual growth rate for FY17-FY20 of 16% and rapid data demand escalation,” it said, adding that Unifi account for 42% of TM’s FY20 revenue.
Meanwhile, it noted that despite the 20-year fibre collaboration arrangement between Celcom, Digi, and Maxis, the likelihood of celcos bypassing TM to offer fibre-to-home services directly is currently uncertain, given the government’s efforts to minimise duplication of resources for 5G deployment.
Over the longer term, TM One – the group’s enterprise and public sector business solutions arm – is expected to gather momentum, given that TM has been selected to be the government’s only domestic cloud service provider together with international operators, Microsoft, Google and Amazon. – Bernama, May 3, 2021
