TM Shares Rise Despite 2Q Profit Dip, DNB Agreement Ended

KUALA LUMPUR, Aug 27 (Bernama) -- Shares of Telekom Malaysia Bhd (TM) rose early Tuesday, despite a lower second-quarter 2024 net profit and a termination notice from Digital Nasional Bhd (DNB) regarding their share subscription agreement.

At 10.45 am, TM's shares were up four sen to RM6.80, with 762,000 shares traded, giving the company a market capitalisation of RM26.10 billion.

TM has requested an extension of the “conditions precedent longstop date” to secure shareholder approval for its stake in the state-run 5G network DNB, a related party transaction, at an upcoming extraordinary general meeting.

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TM’s net profit for the second quarter ended June 30, 2024, fell to RM396.42 million from RM568.74 million a year earlier, while revenue slightly decreased to RM2.91 billion from RM2.96 billion, according to its Bursa Malaysia filing.

Hong Leong Investment Bank Bhd (HLIBB) and Maybank Investment Bank Bhd (Maybank IB) have maintained their forecasts and reiterated "buy" calls on TM.

HLIBB noted that TM Global is expanding digital infrastructure, including international connectivity and data centre (DC) services, to meet the demands of global carriers and hyperscalers.

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“We reiterate our buy call with an unchanged discounted cash flow (DCF)-derived target price (TP) of RM7.91. 

“Leveraging its extensive fibre reach, TM is seen as a critical building block for the national 5G dual wholesale network and DC rollouts,” HLIBB said in a note today.

Maybank IB said TM is a long-term beneficiary of Malaysia’s data centre boom, driven by its connectivity offerings and robust free cash flow, which provides ample room for increased dividends. 

The bank maintained its "buy" call with an unchanged DCF-based TP of RM7.50, noting that TM will continue to support 5G network rollouts through wholesale fibre.

Kenanga Investment Bank Bhd (KIBB) and Public Investment Bank Bhd (PIBB) meanwhile maintained "outperform" ratings on TM, with target prices of RM7.53 and RM8.80, respectively.

KIBB highlighted that not having equity ownership in the 5G networks might allow TM to allocate more resources to its core fixed connectivity business. 

The bank expects significant capital expenditure in the near-to-medium term for submarine cables, given the rise of DCs in Johor and investments by hyperscalers like Google, Amazon and Microsoft in Malaysia. 

“Furthermore, TM’s relatively smaller mobile subscriber base offers less economies of scale compared to its peers, which could impact investments in its own 5G network,” KIBB added.

PIBB reiterated that TM remains its top pick in the telecommunications sector, citing TM’s leading role as the country’s key network infrastructure provider. 

PIBB also believes TM is well-positioned to benefit from Malaysia’s burgeoning data centre industry.

-- BERNAMA