KUALA LUMPUR, Aug 29 — Telekom Malaysia Bhd's (TM) shares were among the most actively traded in the morning session today as investors booked profit from the recent rally in share prices and the company posting stronger second quarter financial results.
At 11.51am, TM shares lost 34 sen to RM3.74 with 15.85 million shares traded. Its shares hit a 52-week high on August 22 in reaching RM4.60.
Kenanga Investment Bank in a research note today said TM's first half financial year 2019 core profit after tax and minority interest (Patami) of RM523.2 million made up 62 per cent and 60 per cent of the investment bank and consensus full-year estimates.
However, it said the second half earnings are expected to be softer, as investment heavy roll-outs could bump up operating expenses.
“At present, we believe the group could well deliver its guidance as the Performance Improvement Programme (PIP) appears to continue demonstrating sustainable results.
“This could sufficiently buffer top-line challenges with pressure to provide more accessible products to the broader consumer market,”it said.
Public Investment Bank in a separate note said although regulatory pressure on TM had subsided and no further decline in broadband prices is expected, TM’s earnings trajectory might not surprise on the upside as cost is not likely to fall drastically.
Furthermore, it said TM’s plan to gradually phase out its expensive but slow speed Streamyx services, could potentially incur higher costs and lose further broadband market share to competitors.
Meanwhile, it said the recent Cabinet decision to approve the RM21.6 billion national fiberisation and connectivity plan (NFCP) over a five-year period beginning this year, would require the participation of TM though the potential economic returns from the project is likely to be low.
“This (NFCP) is expected to be utilised to part-finance the deployment of digital infrastructure, particularly in the underserved areas,” it said.
AmInvestment Bank in another note said given TM’s role as the national broadband provider, the company would likely bear up to half of the NFCP cost, which translated to RM2.2 billion over the next five years.
“Besides TM’s own capex requirements, the NFCP rollout alone translates to 19 per cent of the forecasted financial year 2020 revenue,” it said.
Additionally, it said the thrust of the NFCP towards connecting the rural population could mean that revenue accretion from these investments would be minimal.
Kenanga has downgraded TM to a “market perform” call from “outperform,” but retained the discounted cash flow-driven target price of RM3.95.
Public Investment has maintained its “underperform” rating and target price of RM3.60 on TM.
AmInvestment has retained the “hold” call on TM with an unchanged DCF-based fair value of RM4.25. — Bernama
