TM: Solid Earnings Bolstered by Cost Controls, Positive Future Outlook

Telekom Malaysia (TM) reported a resilient financial performance for the second quarter of fiscal year 2025 (2QFY25), with net profit increasing by 1.7% year-on-year to RM403 million. The results, along with the cumulative first-half performance, aligned closely with both Public Investment Bank’s and consensus full-year estimates, accounting for 49% and 47% respectively.

Performance Review

Despite a 4.7% year-on-year decline in revenue, which settled at RM2,771.9 million for 2QFY25, the group’s profitability remained stable. This was primarily attributed to successful cost optimisation initiatives. Notably, manpower costs, representing 22% of total revenue, saw a significant 15.6% reduction during the quarter. Additionally, depreciation and amortisation charges were lower by 7.8% year-on-year.

Segment-wise, Unifi revenue remained flat, as a 1.8% increase in subscriber base was largely offset by a 2.3% decline in Average Revenue Per User (ARPU). Unifi maintained its position as the largest revenue contributor, accounting for approximately 50% of the total. TM One experienced a 9.4% drop in revenue due to project delays, though this is anticipated to recover in the second half of FY25. TM Global’s revenue also declined by 7.6% year-on-year, impacted by lower contributions from managed wavelength and IRU services, alongside reduced global voice traffic.

Outlook and Strategic Initiatives

Telekom Malaysia remains firmly on track with its strategic vision to become a Digital Powerhouse by 2030, with each business segment playing a crucial role. TM Global is identified as a key pillar for future growth, driven by the country’s expanding network infrastructure, broadband capabilities, and international bandwidth. The group aims to solidify its position as a regional digital hub, focusing on scaling submarine cables, data centres, and edge computing, while also pioneering GPU-as-a-Service (GPUaaS).

The company is well-positioned to benefit from the increasing number of hyperscalers establishing data centre bases in Malaysia, which will enhance its role in regional connectivity, particularly within ASEAN. Furthermore, TM expects to capitalize on the ongoing 5G deployment in the country by providing seamless fibre backhaul services to network providers. The completion of more Consumer-to-Consumer (C2C) projects in 2HFY25 is also expected to contribute positively to future revenue.

Investment View

Public Investment Bank maintains its “Outperform” recommendation on Telekom Malaysia, citing its leading position as the country’s key network infrastructure provider and its prime beneficiary status from 5G deployment and the growing data centre industry. The investment bank has set a target price of RM8.80, representing a potential upside of 25.4% from the last traded price of RM7.02.