TM nears eight-year low after reporting net loss

PETALING JAYA: TM Bhd fell by 7 sen or 3.02% to RM2.25 at yesterday’s close as it steadied near its eight year lows.

The national telecommunications for Internet and telephony provider had on Monday reported its first quarterly loss in 10 years due to impairments on wireless and fixed-network assets.

It reported a net loss of RM175.6mil for the third quarter ended Sept 30 on the back of about RM1bil in impairments.

Market observers noted that the quantum of the fall in its shares had slowed despite the negative news of the surprise net loss that had been reported in its quarterly results.

Public Investment Bank Research in its report said that after the oneoff impairments and other non-operational items are stripped off, the total earnings for the nine-month year-to-date period stood at RM527.5mil, which is lower by 17.7% from the year before.

This is due to the adverse impact from the implementation of the Mandatory Standard on Access Pricing as well as higher direct costs.

“The results were in line with consensus estimate but beat our expectation (87% of full-year estimates) due to better-than-expected contribution from data and Internet segments,” the research house said.

Public Investment Research raised TM’s financial year 2018 (FY18)-FY20 forecast core earnings by 6%-10% after factoring in higher average revenue per user for Unifi and improved data revenues.

“Our discounted cashflow-based (DCF) target price is revised to RM3.60 from RM3.40 previously. We upgrade TM to a trading buy.

“We have, however, reduced our dividends per share forecasts following the revision in dividend payout policy to 40%-60% of earnings,” it said.

Meanwhile, CIMB Research in its report said that TM’s results are “largely in line” with its forecasts and noted that the next quarter’s earnings may be weaker due to broadband price revisions and normalisation of tax rates.

“We lower our FY18-FY20 forecast dividend payout ratio from 90% previously to 50%-70%. This resulted in lower projected net debt and interest cost, boosting our FY19FY20 forecast core earnings per share slightly by 0.5%-2.0%.

“Down 61% in 12 months, we believe TM’s share price is now near the bottom,” CIMB Research said, rating TM a “hold” with a DCF target price of RM2.50.