Investment Highlights

• We maintain our HOLD call on Telekom Malaysia (TM) with unchanged forecasts and DCF-based fair value of RM3.50/share based on a WACC of 7.3% and terminal growth rate of 1%. This implies an FY20F EV/EBITDA of 5x.

• The New Straits Times reported that TM chief operating officer (COO) Imri Mokhtar, who was the acting group chief executive officer (CEO) from November 2018 until June 2019 and originally chosen by the Ministry of Finance to be the CEO, has resigned from the group.

• In an internal email to its staff today, TM group CEO Datuk Noor Kamarul Anuar Nuruddin said Imri had decided to leave the company effective 31 January 2020 to pursue other opportunities.

• Imri, 46, was appointed as acting group CEO following the resignation of Datuk Bazlan Osman in November 2018. Following the appointment of Noor Kamarul in June last year, Imri resumed his post as TM COO. Media reported that TM chairman Rosli Man had refused to proceed with Imri’s appointment as group CEO despite the approval of the group’s special shareholder, the Minister of Finance Inc.

• As the current COO, Imri is responsible for the business operations of unifi, TM ONE, TM Global clusters and IT & NT of TM Group. Starting his career with TM in 1996 and rejoining TM in 2005, Imri has served in various positions, including programme and performance management office vice president and consumer EVP. Prior to rejoining TM in 2005, Imri was at a pay-TV operator in Malaysia and before that, a consultant at a global management consulting firm. He is also a director of Webe Digital Sdn Bhd (webe), now renamed Unifi Mobile.

• Separately, TM named Anand Vijayan as its new chief commercial officer, responsible for unifi product development and marketing for consumer and SMEs as well as for the group’s regional operations, effective from 1 February 2020.

• We do not expect Imri’s resignation to significantly impact the group’s strategic direction and operations, given that the current CEO Noor Kamarul has already been in his role for 6 months amid the support of a broad mid-level management executives.

• Before joining TM on 13 June last year, Noor Kamarul was a member of Celcom Axiata Bhd’s (Celcom) senior management team from 2003 to March 2018, first as chief technology officer responsible for its network strategic plan, then chief information technology & transformation officer responsible for developing its IT infrastructure and chief carrier collaboration officer.

• Nevertheless, the potential impact of the National Fiberisation & Connectivity Plan, which could further halve entry price packages this year while significantly raising the capex levels of fibre infrastructure owners, together with 5G rollouts could translate to lower dividend payouts. Hence, the stock currently trades at a fair FY20F EV/EBITDA of 5x with a decent dividend yield of 4% for now.

Source: AmInvest Research - 30 Jan 2020