Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Telekom Malaysia Bhd
(July 4, RM3.95)
Maintain outperform at RM3.94 with revised target price of RM4.92 (from RM5.10): Our non-deal roadshow with TM left us feeling more upbeat on the telco. The positive surprise is that take-up of Unifi continues to rise and is trending a little ahead of our expectations. More importantly, the number of applications is still on the uptrend, which, together with increasing coverage of homes, suggests that the strong growth is sustainable.
The negative surprise was the higher-than-expected FY12/FY13 capital expenditure. We cut our FY12/FY13 earnings per share by between 9% and 10% and target price to RM4.92 from RM5.10 based on sum-of-parts after raising our capex assumptions to levels closer to management's. TM remains an 'outperform' and our top Malaysian telco pick. Likely price catalysts include strong take-up of Unifi, sale of its shares in Axiata Group Bhd and positive earnings surprises.
Based on numbers up to the third week of June, Unifi may have roped in about 45,000 users in 2Q, a substantial jump from the 31,000 added in 1Q and also above our estimate of 38,000. More importantly, the number of applications is still on the uptrend. This suggests that the strong growth is sustainable, especially since homes passed (coverage of homes) is on the rise.
TM targets wholesale revenue to rise from 9% of total revenue in FY10 to 12% in three to five years. It is confident of achieving this goal, helped by Celcom Bhd and Maxis Bhd, which have signed up for wholesale access to TM's high-speed broadband.
The main concerns highlighted were: (i) its low return on equity which TM thinks should rise on the back of the Unifi take-up; (ii) falling voice revenue; and (iii) potential rise in manpower costs if minimum wage is introduced or the retirement age raised. ' CIMB Research, July 4
This article appeared in The Edge Financial Daily, July 5, 2011.
Company Name: TELEKOM MALAYSIA BHD
| Research House: CIMB | Price Call: BUY | Target Price: 4.92 |
Telekom Malaysia Bhd
(July 4, RM3.95)
Maintain outperform at RM3.94 with revised target price of RM4.92 (from RM5.10): Our non-deal roadshow with TM left us feeling more upbeat on the telco. The positive surprise is that take-up of Unifi continues to rise and is trending a little ahead of our expectations. More importantly, the number of applications is still on the uptrend, which, together with increasing coverage of homes, suggests that the strong growth is sustainable.
The negative surprise was the higher-than-expected FY12/FY13 capital expenditure. We cut our FY12/FY13 earnings per share by between 9% and 10% and target price to RM4.92 from RM5.10 based on sum-of-parts after raising our capex assumptions to levels closer to management's. TM remains an 'outperform' and our top Malaysian telco pick. Likely price catalysts include strong take-up of Unifi, sale of its shares in Axiata Group Bhd and positive earnings surprises.
Based on numbers up to the third week of June, Unifi may have roped in about 45,000 users in 2Q, a substantial jump from the 31,000 added in 1Q and also above our estimate of 38,000. More importantly, the number of applications is still on the uptrend. This suggests that the strong growth is sustainable, especially since homes passed (coverage of homes) is on the rise.
TM targets wholesale revenue to rise from 9% of total revenue in FY10 to 12% in three to five years. It is confident of achieving this goal, helped by Celcom Bhd and Maxis Bhd, which have signed up for wholesale access to TM's high-speed broadband.
The main concerns highlighted were: (i) its low return on equity which TM thinks should rise on the back of the Unifi take-up; (ii) falling voice revenue; and (iii) potential rise in manpower costs if minimum wage is introduced or the retirement age raised. ' CIMB Research, July 4
This article appeared in The Edge Financial Daily, July 5, 2011.
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