KUALA LUMPUR, Feb 27 — Telekom Malaysia Bhd’s shares are poised to trade higher after AllianceDBS Research raised its target price (TP) a ringgit higher to RM7.75, to reflect better growth prospects for the company.
The research house has upgraded TM’s rating to a ‘buy’ call, from ‘hold’, as the telco’s core earnings beat expectations.
TM posted a higher pre-tax profit of RM1.10 billion for the financial year (FY) ended Dec 31, 2014 compared with RM1.04 billion in 2013, driven by higher average revenue per user (ARPU) for Internet services.
TM’s upbeat performance was mainly driven by higher ARPU for Unifi and Streamyx services, as well as better performance at the wholesale and global divisions, AllianceDBS Research said in a note today.
The research firm said demand for higher bandwidth remains strong, with 48 per cent of Streamyx subscribers now on 4 megabits per second (Mbps) package and above (FY13: 41 per cent).
“Reflecting this, we raised TM’s FY15-16F earnings per share (EPS) by seven to nine per cent.
“To reflect better growth prospects, we raise our terminal growth assumption from one per cent to 1.5 per cent, and all in, we raised our Discounted Cash Flow (DCF)-based TP to RM7.75,” said AllianceDBS Research.
The research firm also said growth opportunities in Long-Term Evolution (LTE) spectrum, High-Speed Broadband Phase 2 (HSBB2) and Sub Urban Broadband (SUBB) provide a potential catalyst for TM.
“We expect the RM3.4 billion HSBB2 and SUBB projects to drive further growth for TM as it rolls out the high-speed network in more areas,” it said.
Meanwhile, it said, the acquisition of P1 (which owns LTE spectrum) will also open up a new addressable market for TM in the mobile segment, especially in data where TM can leverage on its superior fixed line network.
At lunch break, TM’s share price on Bursa Malaysia inched up one sen to RM7.11, with 1.75 million shares traded. — Bernama
