TM: Telecommunications Group Posts Expected Profit Amid Revenue Softness, Buy Rating Affirmed
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM8.30 (+18.2%) |
| Last Traded | RM7.02 |
| Recommendation |
A leading telecommunications group reported core profit for the first half of FY25 (IHFY25) that was largely in line with market expectations. This performance, achieved despite a slight decline in revenue, was primarily bolstered by effective cost optimisation efforts and lower tax expenses. TA Securities has maintained its “BUY” rating on the stock, alongside an unchanged target price of RM8.30. The group also declared a first interim dividend of 12.5 sen per share, consistent with the prior year.
Performance Review
The group’s IHFY25 core profit reached RM847 million, aligning closely with both TA Securities’ and consensus full-year estimates. However, normalised EBITDA for the period saw a 3.1% year-on-year decline to RM2,269 million. This was mainly due to lower overall revenue, increased 5G access costs, and higher customer acquisition and retention expenses. Total revenue for IHFY25 fell 2.1% year-on-year to RM5,623 million, impacted by a softer consumer market and intense competition. Despite these headwinds, core profit increased 3.1% year-on-year, benefiting from reduced tax expenditures.
Quarter-on-quarter, 2QFY25 revenue decreased by 2.8% to RM2,772 million, largely impacted by lower contributions from data, internet, and other telecommunication services. Nevertheless, the group demonstrated strong operational discipline, with normalised EBITDA rising 8.3% quarter-on-quarter to RM1,180 million, supported by ongoing cost optimisation initiatives. Consequently, core profit surged 11.1% quarter-on-quarter to RM446 million.
The Unifi segment continued its robust fixed broadband subscriber acquisition, adding 3,000 net subscribers quarter-on-quarter to reach a new high of 3.188 million. This growth, partly driven by aggressive promotions, led to a slight ARPU (Average Revenue Per User) dilution of 1.6% quarter-on-quarter, settling at RM125.
Future Outlook
Management reiterated that the group remains on track to meet its FY25 guidance. The positive outlook is underpinned by steady subscriber growth from expanded B2C convergence packages, stronger B2B project execution, and an increasing C2C demand driven by hyperscaler bandwidth and data centre expansion. For FY25, the group expects to deliver low single-digit revenue growth, EBIT broadly in line with FY24, and a CAPEX-to-revenue ratio of 14%-16%.
Analyst’s Recommendation
TA Securities has reaffirmed its “BUY” call on the stock, maintaining its target price at RM8.30, which represents an 18.2% upside from the last traded price of RM7.02. The target price is derived using a DCF valuation model, incorporating an 8.5% WACC, a 2.0% long-term growth rate, and a 3% ESG premium.
