16 July 2025

• We left a recent management meeting with positive views, underpinned by TM’s long-term structural growth prospects across both Unifi and TM Global
• TM is on track with the expansion of KVDC and IPDC, each targeting completion by end-25, while its 51:49 JV with Singtel to develop a 64MW AI-ready data centre in Iskandar Puteri is progressing as scheduled for completion by 2H26
• Maintain BUY rating with lower 12-month target price of RM8.05 (from RM8.35)

PRICE VS. FBMKLCI

[Chart data omitted. Shows T MK EQUITY and FBMKLCI Index from Jul-24 to Jul-25, with T MK EQUITY fluctuating between 6.5 and 7.5 and FBMKLCI index showing a slight downward trend.]

Source: Bloomberg

Unifi’s quad-play convergence packages could unlock long-term upside

While ARPU declined 5.2% YoY to RM127 in 1Q25, management highlighted encouraging early traction from its quad-play convergence strategy (broadband, mobile, telephony, and TV). With convergence package adoption still below 50%, there remains significant potential for ARPU uplift. Despite trailing Maxis and CelcomDigi in net adds over recent quarters, TM still benefits from wholesale monetisation, limiting the downside to its fibre earnings base. Its extensive fibre coverage of over 80%, along with continued leasing by peers, underscores TM’s structural advantage in an increasingly competitive market.

Data centre expansion remains on track

TM is progressing with the expansion of its Klang Valley (KVDC) and Iskandar Puteri (IPDC) data centres, adding 10MW each by end-25, doubling total domestic capacity to c.40MW. Construction at both sites is already over 60% complete. Concurrently, TM, via a 51:49 joint venture with Singtel, is developing a 64MW AI-ready data centre (Phase 1) in Iskandar Puteri, which remains on track for completion by 2H26. While the new facility’s near-term earnings contribution will likely be minimal, we expect it to drive double-digit revenue growth for the data centre segment over the longer term.

Maintain BUY with lower TP of RM8.05

We trim our 2025-26E core EPS forecasts by 4-7%, reflecting lower growth assumptions across all business segments, in line with management’s conservative guidance. Despite the revision, we maintain our BUY rating, with a lower DCF-derived TP of RM8.05 (from RM8.35). TM’s growth outlook remains compelling, driven by its proactive 5G rollout, ongoing fibre backhaul expansion, and leadership in fixed broadband, with around 3.2m subscribers. Key downside risks to our call include regulatory changes, slower-than-expected demand for DC interconnectivity, and intensified competition in fibre broadband.

Key Financials

Sources: Company, Bloomberg, Phillip Research forecasts

Convergence traction to support long-term upside.

TM’s Unifi segment remains the group’s most significant revenue contributor, accounting for c.46% of total revenue in 2024. While ARPU declined by 5.2% YoY to RM127 in 1Q25, management highlighted early signs of traction from its convergence strategy, which bundles broadband with mobile, telephony, and TV. Currently, less than 50% of Unifi subscribers are on convergence plans, implying upside potential for ARPU as adoption of quad-play offerings improves. Despite a competitive fixed broadband landscape, TM retains a structural advantage through its extensive fibre footprint, which covers over 80% of national fibre coverage. Major mobile operators, including Maxis and CelcomDigi, continue to lease fibre access from TM. TM earns c.RM50-60 per subscriber via wholesale leasing, compared to c.RM90 from retail Unifi users. That said, Unifi has lagged behind its peers in subscriber net additions, trailing CelcomDigi for two consecutive quarters (4Q24 and 1Q25) and falling behind Maxis in 1Q25. Nevertheless, even when fixed broadband customers subscribe via third-party providers, TM still benefits through wholesale monetisation, limiting the downside to its fibre earnings base.

Table 1: Fixed broadband subscribers net adds

[Chart data omitted. Bar chart showing net adds for CDB, Maxis, and TM from 1Q23 to 1Q25.]

Sources: Company, Phillip Research

KVDC and IPDC on track for end-25 completion.

TM currently operates six data centres across Malaysia and one in Hong Kong, with a combined capacity of 20MW at KVDC and IPDC. Although the data centre segment contributes presently less than 1% to group revenue, management remains committed to scaling the business, supported by demand growth. TM is expanding KVDC and IPDC, with an additional 10MW each targeted by end-25, doubling total domestic capacity to c.40MW. Construction progress has surpassed 60% for both sites. Aside from that, TM, in partnership with Singtel (51:49 JV), is developing a 64MW AI-ready data centre (Phase 1) in Iskandar Puteri. The project remains on track for completion by 2H26. While we do not expect the new data centre to contribute meaningfully in the near term, over the longer term, we expect the new data centres to drive double-digit revenue growth potential for TM’s data centre segment.

Table 2: TM data centre infrastructure

[Map/Diagram data omitted. Shows locations of BFDC, KJDC, KVDC, IPDC in Malaysia and a regional data centre in Hong Kong. Also indicates a future AI-Ready DC.]

Sources: Company, Phillip Research

Submarine cables & hyperscaler demand to support TM Global growth.

TM is a part of the international consortium developing the Southeast Asia-Middle East-Western Europe 6 (SEA-ME-WE 6) submarine cable system. The group currently owns over 340,000 km of submarine cables, spanning 35 international systems, which reinforces its position as a key regional connectivity provider. Based on our channel checks, demand from hyperscalers for high-throughput fibre and backhaul capacity remains resilient, which is expected to support greater adoption of TM’s managed wavelength services and IRU for submarine cable leasing. Going forward, we forecast TM Global’s revenue contribution to increase to c.30% of group revenue by 2030 (from c.25% in 2024), supported by sustained growth in international bandwidth demand and rising IRU contract uptake.

Table 3: SEA-ME-WE 6 cable system

[Map data omitted. Shows the route of the SEA-ME-WE 6 cable system from Marseille, France to Tuas, Singapore, with multiple landing points in Europe, the Middle East, and Asia.]

Sources: Company, Phillip Research

2Q25 results preview: Marginally higher QoQ.

We expect TM 2Q25 core net profit to come in marginally higher QoQ (1Q25: RM409m; 2Q24: RM398m), supported by stable operations across its business segments, albeit within a competitive pricing environment. To recap, Unifi’s ARPU softened to RM127 in 1Q25 (vs. the historical average of RM130-134), reflecting the impact of ongoing promotional activities, namely retention discounts and acquisition offers, as TM continues to match aggressive price competition in the market. Given the current landscape, we do not expect any material uplift in ARPU in 2Q25. That said, Unifi’s net subscriber additions are expected to remain healthy, underpinned by TM’s extensive fibre network. We expect TM One to post slight QoQ revenue growth in 2Q25, supported by sequential improvement from a seasonally softer 1Q25. TM Global’s revenue is expected to remain broadly flat in 2Q25, as incremental contributions from fibre leasing and DC demand are likely to be offset by the absence of major project deliveries that typically occur in 2H of the year.

Table 4: Quarterly fixed broadband ARPU

[Chart data omitted. A line chart showing ARPU for CDB, Maxis, and TM from 1Q23 to 1Q25, with TM’s ARPU generally trending slightly down.]

Sources: Company, Phillip Research

Table 5: Quarterly fixed broadband subscribers

[Chart data omitted. A line chart showing subscriber numbers for CDB, Maxis (LHS axis) and TM (RHS axis) from 1Q23 to 1Q25, with TM showing steady growth.]

Sources: Company, Phillip Research

Cut EPS forecasts by 4-7% on conservative 2025 guidance.

Management has guided for (1) low single-digit revenue growth, (2) flat EBITDA YoY, and (3) a capex-to-revenue ratio of 14-16% for 2025. Reflecting management guidance, we now project TM’s topline to grow by 3.5-3.6% YoY over 2025-27E, with core earnings projected to expand by 3.5-4.5% YoY, supported by sustained momentum in both Unifi and TM Global segments. While we do not expect significant near-term upside to Unifi ARPU, TM’s strong positioning in the fibre broadband market, anchored by its c.3.2m subscriber base as at 1Q25, should continue to support subscriber growth, with net adds estimated at 50-70k annually over 2025-27E. TM One’s revenue contribution is expected to remain broadly stable, underpinned by long-term, recurring managed service contracts with government-linked and enterprise customers. Meanwhile, TM Global stands to benefit from ongoing domestic backhaul investments and subsea infrastructure expansion, positioning the group well to capture rising demand for cross-border connectivity and data centre interconnectivity. Overall, we trim our 2025-26E core EPS forecasts by 4-7%, after lowering growth assumptions across all segments in line with management’s guidance.

Table 6: Historical and forecasted revenue

[Chart data omitted. Bar chart showing EBITDA (LHS) and Core net profit (LHS) with line charts for their respective margins (RHS) from 2023 to 2027E.]

Sources: Company, Phillip Research forecasts

Table 7: Historical and forecasted profit and margins

[Chart data omitted. Bar chart showing Revenue (LHS) and a line chart for YoY growth (RHS) from 2023 to 2027E.]

Sources: Company, Phillip Research forecasts

Valuation and recommendation

Maintain BUY with lower TP of RM8.05. We reiterate our BUY call on TM with a revised 12-month DCF-derived target price of RM8.05 (from RM8.35), following adjustments to our earnings forecasts in line with management’s conservative guidance. Despite near-term moderation, we remain constructive on TM’s long-term growth prospects, anchored by its strategic position as Malaysia’s leading fixed broadband market, with a solid subscriber base of c.3.2m, and its critical role in the expanding fibre and internet infrastructure ecosystem. The ongoing national 4G and 5G rollout under DNB is expected to enhance TM’s Wholesale segment, leveraging its extensive fibre footprint. In addition, TM is well-positioned to capitalise on sector tailwinds from rising data consumption and accelerating digitalisation trends. At the same time, its ongoing DC expansion enhances its ability to serve the growing demand from hyperscaler clients and AI workloads.

Table 8: TM’s 5-year PE

[Chart data omitted. A line chart showing TM’s 5-year PE ratio from Jul20 to Jul25, with lines for Avg, +1SD, +2SD, -1SD, -2SD.]

Sources: Bloomberg, Phillip Research forecasts

Table 9: DCF valuation

Sources: Bloomberg, Phillip Research forecasts

Key risks to our call.

Key upside risks to our BUY rating include weaker-than-expected recovery in ARPU, intensifying competition in fixed broadband, rising operational costs from network expansion, slower-than-expected growth in data centre demand and regulatory risks.

FINANCIALS