• The Minister of Communications and Digital, Fahmi Fadzil, announced a new Fixed Broadband Unity package (Pakej Perpaduan Jalur Lebar Tetap) which aim to provide affordable internet for B40, veterans, people with disabilities and senior citizens.

• The new package will provide high-speed broadband up to 30Mbps with unlimited data at RM69/month. The plan will start to be offered from March 2023 and comes with a 24-month contract. At RM69/month, the package is 22% cheaper than the current RM89/month plan offered by Telekom Malaysia (TM).

• Given that the plan is targeting a very niche group, we do not expect the impact will be material to TM’s revenue. Assuming 30% of total unifi fixed broadband subscribers (2.9mil as at September 2022) are opting for the current RM89/month at 30Mbps plan, the worst-case scenario impact is estimated at RM17mil or <1% of the group’s FY22F revenue, in our view.

• All in, we made no changes to our earnings forecasts given that the impact will likely be negligible.

• The stock is trading at a compelling FY23F P/E of 13.2x, below its 5-year historical average of 17.8x while offering a decent dividend yield of 3%.

• Maintain BUY on TM with unchanged DCF-based fair value of RM7.20/share (WACC: 8.5%, terminal growth: 1.5%), which implies 18x FY23F PE (near its 5-year mean).

Source: AmInvest Research - 3 Feb 2023