TM: Key Telecom Player Exceeds Expectations on Efficiency Gains, Analysts Raise Target Price
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading investment bank highlights a positive trajectory for select players within the telecommunications sector, with a particular entity demonstrating strong performance attributed to robust efficiency gains and strategic operational shifts. This optimistic outlook comes despite broader sector uncertainties, positioning certain companies for significant upside potential.
Performance Highlights and Strategic Initiatives
The report notes that several fixed-line players, including Telekom Malaysia (TM) and Time dotCom (TDC), were key outperformers in 2025, recording substantial share price gains of 25% and 28% respectively. This performance was underpinned by strong structural growth drivers and a promising dividend outlook. For instance, Maxis has seen its EBITDA growth guidance upgraded to a mid-single-digit, reflecting enhanced operational strength and effective cost management.
A key re-rating catalyst for Axiata Group is its ongoing Edotco monetisation. This strategic move is anticipated to generate proceeds that will significantly reduce the group’s USD-denominated holding company debt by over MYR8.2 billion, thereby strengthening core earnings by lowering annual financing charges by more than MYR2 billion. This deleveraging effort is ahead of management’s stated targets, demonstrating effective financial stewardship.
Navigating Challenges with Efficiency and Growth Drivers
While the sector maintains a ‘NEUTRAL’ rating due to lingering uncertainties surrounding 5G implementation and the Digital Nasional Berhad (DNB) restructuring, individual companies are proactively addressing these challenges. The restructuring of DNB, following the acquisition of a 41.7% stake by mobile network operators (MNOs), is expected to drive significant cost optimisation and debt refinancing efforts. This shift is crucial for mitigating the previous MYR1.2 billion in net losses incurred by DNB in FY23-24, turning a financial drag into a pathway for operational efficiencies for MNO shareholders.
The industry is also witnessing a strategic pivot towards high-growth wholesale and enterprise segments, moving away from slower consumer/retail growth. Companies like TM and TDC are well-positioned to capitalize on this trend, having significantly expanded their data center capacities to meet rising co-location demands driven by cloud, artificial intelligence (AI) workloads, and GPU-as-a-service solutions. CelcomDigi (CDB) is also expected to realize greater integration synergies with the completion of its Phase 2 IT upgrades by late FY26 or early FY27.
Future Outlook and Investment Recommendation
Looking ahead to 2026, the sector is poised for further developments, including potential dividend surprises from companies like TM and TDC, given their robust balance sheets and strong operating cash flows. The focus on asset monetisation and balance sheet deleveraging, particularly for Axiata, underscores a commitment to enhancing shareholder value. These strategic moves and a clear focus on operational efficiencies are expected to yield substantial benefits.
In light of these positive catalysts and strategic execution, a leading investment bank has reiterated a ‘BUY’ recommendation, coupled with a revised target price of RM0.25, representing a substantial 25.0% upside from the last traded price of RM0.20. This indicates strong confidence in the ability of select telecom players to outperform through efficiency gains and strategic market positioning.
