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Author: PublicInvest   |   Latest post: Fri, 19 Apr 2019, 10:04 AM

 

Telekom Malaysia - MFL Seeking Relief For Sponsorship Termination

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Telekom Malaysia (TM) announced that it has received a writ of summons and statement of claim from Malaysian Football League (MFL) seeking relief for the termination of sponsorship from TM. This was pursuant to the 8-year sponsorship contract between TM and MFL worth RM480m that was signed in February 2018. MFL is now claiming a total sum of RM428m, which equates to the remaining contract value of the sponsorship. In our opinion, the total sum seems a little far-fetched as we reckon TM would have assessed the risks and taken into consideration the necessary terms and conditions before terminating the contract. At this juncture, we maintain our core earnings forecasts, though we see downside risk to headline profit should TM fail to defend itself. Although we maintain our Neutral rating on TM (DCF-based TP at RM3.60), we believe this could be a drag on its share price performance in the near term as the legal proceeding could be a long drawn issue and settlement is not likely to be reached anytime soon.

  • What are the major claims? Some of the relief that MFL is seeking include RM186,844 due for Season 2018, cost incurred by MFL for the removal of all TM’s unifi marks and/or references to TM from all of MFL’s property and merchandise, RM51.7m being payment for the sponsorship and broadcast consideration for year 2019 and RM376.6m being the remaining consideration for years 2020-2025.
  • To recap, in February 2018, TM’s unifi brand was signed as the title sponsor for the Super League and Malaysia Cup for an 8-year partnership worth RM480m until 2025. MFL has accused TM of failing to meet its RM60m annual sponsorship obligation before the M-League kicked off on February 1. TM, on the other hand, has said in a filing to Bursa Malaysia that both sides were not able to mutually agree on several fundamental commercial terms necessary for the intended collaboration, leading to the termination of the contract.

Source: PublicInvest Research - 22 Mar 2019

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