TM to record faster growth from govt digitisation push
Telekom Malaysia Bhd (TM) is expected to benefit from the government’s push for greater digitalisation across the nation, with analysts expecting the group to record faster growth particularly in its wholesale business.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) highlighted three catalysts ahead for the group.
“Firstly, in Malaysia’s push for digitalisation, TM looks to sweat its assets to benefit from leasing its extensive fibre network to Digital Nasional Bhd for 5G deployment, leasing fibre capacity to other telcos for 4G coverage expansion, and greater usage of TM’s Content Delivery Network as consumers demand more content at higher speeds and lower latencies.
“Secondly, having gained the government’s trust and being a large tech company, TM may be viewed as a preferred cloud partner for enterprises large and small, in our view. This bodes well for TM as we foresee greater adoption of cloud services as enterprises find an increasing need for digitalisation. TM’s bundling of adjacent services, such as cyber-security, should ensure healthy ARPA.
“Thirdly, TM posted its fourth consecutive quarter with net adds to its broadband subs base, signalling that TM is not only converting Streamyx subs into unifi subs, but also acquiring new unifi subs from expanded fibre coverage.
“We believe that TM will continue to post strong Unifi subs growth as consumers’ increasingly digital lifestyle require stable and higher speeds, of which fibre can deliver,” it said.
In a separate note, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) opined that the announced MyDigital initiatives would bode well for the group.
“Premised on this, we expect the group’s revenue growth in the coming years to remains intact,” it said. “This would be reflected across TM’s main revenue cluster namely Unifi, TM One and TM Wholesale.
“Moreover, we commend the group’s cost rationalisation programme which has significantly improves the group’s profitability.”
On its recently released first quarter of 2021 (1Q21) results, MIDF Research noted that TM’s 1QFY21 normalised earnings increased by 37.7 per cent y-o-y to RM331.5 million in-line with the marginal increase in revenue to RM2.8 billion (up 9.9 per cent y-o-y).
“The higher revenue in the current quarter was mainly due to higher contribution from all business lines namely Unifi, TM One and TM Wholesale,” it added.
It also noted that TM invested higher capex, 8.8 per cent of revenue to RM247 million as the group continued to modernise its network and technology platforms. Out of that, 69 per cent of the amount invested was allocated for the network access Jendela, 12 per cent for core network and 19 per cent for support system.
All in, MIDF Research maintained its ‘buy’ call on the stock while Kenanga Research reiterated its ‘outperform’ rating.