TM re-rating likely

TheStar Thu, Jan 21, 2021 09:20am - 1 month ago


Firm needs to consolidate with mobile and fibre players

PETALING JAYA: A research house has raised the fair value of Telekom Malaysia Bhd (TM) by one ringgit to RM7.10 a share from RM6.10 previously.

It based it on a lower weighted average cost of capital assumption (WACC) of 6.1% and an unchanged terminal growth rate of 2%.

AmInvestment Research said the lower WACC assumptions arose from the reduction of its equity discount rate to 9% from 10% given the low interest rate environment with Malaysian government bond yields at 2.6% currently.

The research house retained its “buy’’ call on the stock.

As it is, the stock currently trades at an attractive financial year (FY) 2021 enterprise value/earnings before interest, tax, depreciation and amortisation (EV/EBITDA) of 7x versus Maxis Bhd’s 13x.

“TM also offers a compelling dividend yield of 4%. The share price has thus far risen nearly 60% since its last review,” said the research house.

With the concept of sharing infrastructure in the industry, the house also believed that TM can be re-rated further if it opts to consolidate with mobile and fibre players.

TM’s unifi Mobile has also lowered its unlimited data plan to only RM59 per month for existing unifi Home broadband customers and RM79 per month for non-unifi users from RM99 per month for a limited time. The research house said for January to March this year, unifi Mobile is doubling hotspot data to 20GB for tethering requirements.

In conjunction with the Chinese New Year season, TM is also offering a special promotion with a chance to win smartphones and e-wallet credit.

“While this has led to a more attractive unifi Mobile offering, it said that rival U Mobile’s unlimited mobile plan offers a lower RM30 per month with speed caps at 6mbps and 6GB of hotspot data.

“We view this new offering as a more direct competition against U Mobile’s postpaid plan currently priced at RM58 per month which offers unlimited speed and calls with 10GB of hotspot data until April 30,’’ it said.

The research house also maintained its forecasts pending a stronger sustainable earnings delivery from the mobile segment.






Related Stocks

MAXIS 4.660
TM 6.050

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