TM: Strong Earnings Performance Driven by Strategic Initiatives

PublicInvest Bank reported that a prominent Malaysian telecommunications provider achieved a significant 47.6% year-on-year increase in net profit for the third quarter of fiscal year 2025 (3QFY25), reaching RM686.3 million. This robust performance was primarily attributed to substantial non-operating gains, including the monetization of unused copper cables, fair value adjustments from investments in a technology fund, and lower tax charges. The investment bank noted that the company’s normalised EBIT for the first nine months of FY25 was in line with their expectations, making up 80% of their full-year forecast. PublicInvest Bank maintains its “Outperform” rating on the stock, with an unchanged target price of RM8.80.

Performance Review

The company’s 3QFY25 revenue saw a modest 2.6% year-on-year increase. While its Unifi segment recorded a marginal 1.4% revenue increase, driven by a 1.6% rise in its subscriber base and an aggressive customer retention strategy, average revenue per user (ARPU) remained stable at RM130. The TM Global segment emerged as the strongest performer, with a 9% revenue increase. This growth was fueled by the deployment of 4G and 5G backhaul services, expanded infrastructure to support data centre expansion, and increased cross-border traffic. Conversely, the TM One segment experienced a 3.9% year-on-year decline in revenue, partly due to a one-off settlement recognized in 3QFY24.

Despite the strong profit growth, operating costs increased by 3% year-on-year, primarily due to higher direct and manpower expenses. Depreciation costs also saw a marginal rise, with expectations for a further increase in the final quarter.

Future Outlook and Strategic Direction

Looking ahead, the group remains committed to its long-term vision of becoming a Digital Powerhouse by 2030, with each business segment playing a crucial role in its strategic aspirations. PublicInvest Bank highlighted TM Global as a pivotal growth driver, leveraging the country’s expanding network infrastructure, broadband capabilities, and international bandwidth to solidify its position as a digital hub for the region. This strategic focus includes scaling submarine cables, expanding data centres, and pioneering edge computing services, notably GPU-as-a-Service (GPUaaS). With a growing number of hyperscalers establishing data centre bases in Malaysia, the company is poised to assume a more expansive role in regional connectivity, particularly within ASEAN. The group is also expected to benefit significantly from ongoing 5G deployment, providing seamless fibre backhaul services to network providers nationwide.

PublicInvest Bank reiterated its “Outperform” recommendation, positioning the company as a top pick in the telecommunications sector. The investment bank views the company’s leading role as the country’s key network infrastructure provider and its potential to benefit from 5G deployment and the burgeoning data centre industry in Malaysia as key strengths. The target price remains at RM8.80.