KUALA LUMPUR – Telekom Malaysia Bhd’s (TM) overall outlook remains favourable with the telecommunications company (telco) potentially benefitting from strong fibre uptake and ongoing cost optimisation, said Maybank Investment Bank (Maybank IB).
It said even with the prosperity tax (cukai makmur), TM is expected to be on course for double-digit earnings per share (EPS) growth in its financial year ending December 31, 2022 (FY2022).
TM’s core net profit in the second quarter to June 30, 2022 (Q2 2022) was above consensus forecasts and was a new quarterly high, it said in a note today.
The investment bank said the better results were due to the outperformance in its earnings before interest, tax, depreciation and amortisation (Ebitda) and lower-than-expected depreciation.
Maybank IB said TM remained its preferred sector pick and reiterated its “buy” call on the stock, with a higher target price (TP) of RM7.80 from RM7.50 previously.
It noted that TM’s earnings are typically weakest in the fourth quarter due to the backloading of project costs and year-end provisioning.
Meanwhile, CGS-CIMB Securities Sdn Bhd has reinforced its positive view of TM as the telco recorded strong Q2 2022 results coupled with indications of continued positive momentum into the second half of the year (2H 2022).
The stockbroking house said TM also remained its preferred telco pick and reiterated its “buy” call with a higher TP of RM7.30.
“We raise our FY2022-2024 (forecast) core EPS by nine to 15%, after factoring in higher revenue for the voice (international wholesale minutes, Unifi subs growth), data and internet segments.
“For data revenue, we are now assuming a higher growth rate to factor in higher wholesale domestic fibre lease (4G/5G backhaul, strong demand for high-speed broadband access), and enterprise revenue (after TM One resumed year-on-year(y-o-y) growth in Q2 2022),” it said.
On post-revision, CGS-CIMB sees TM’s core EPS growing 4.5% y-o-y in FY2022 (forecast), then by a much stronger 37.9%/12.3% y-o-y in FY2023/2024 (forecast) respectively on decent revenue growth, improving Ebitda margin (with flat to declining staff cost), savings from Menara TM lease expiry, lower interest cost (debt repayments) and absence of prosperity tax.
TM expects TM One’s positive momentum in Q2 2022 to continue in 2H 2022, as it notes the public sector has kick-started spending again, while enterprise customers are showing good demand for connectivity and business solutions.
TM One’s new Enterprise Digital Services unit, Credence, may also start contributing in 2H 2022 as it secures cloud migration and digital transformation projects from large enterprises.
TM is seeing rising demand for its data centres (DC) from hyperscalers and enterprises. As utilisation rates are now very high, the telco is in the midst of finalising plans to expand its DC capacity.
TM also plans to further pare down debt where possible to realise interest cost savings and improve its gearing levels. – Bernama, August 26, 2022
