TM’s 4Q17 earnings recovered qoq to grow by 9%. The growth was driven by higher service revenues across all product segments (ie. voice, data, internet & others) as well as divisions (ie. unifi, TM ONE, TM GLOBAL & others). However, EBITDA margins were under pressure as this related to higher maintenance and direct costs which are mainly related to its mobile business.
Against 4Q16, core earnings fell 18% while core EBITDA fell 6% yoy. The weaker performance due to weaker voice and data revenues. For TM ONE, management also noted that weaker revenues were due to discounts requested by its end clients.
In its pursuit as the convergence champion, TM has its work cut out. FY17 revenues grew by only 0.2% while core EBITDA fell 6% to RM3.6bn. The core profit growth (+1.8%) was mainly due to lower depreciation charge which, in FY16, was inflated by accelerated depreciation and asset write off for WiMAX assets, as well as staff costs with inflated by introduction of Skim MESRA in FY16.
Plans are underway to ensure its convergence-themed growth are on track in FY18. With higher costs from unifi mobile, marketing spend are focused on digital platforms. The growing net adds on unifi has seen growing premium channel purchases on HyppTV. The new data centre in Iskandar and submarine cables would underpin TM ONE and TM GLOBAL’s growth going forward.
We lowered FY18/19E forecasts by 6%/7% following updated guidance and minor housekeeping of our numbers.
Maintain BUY on TM with a reduced DCF-derived TP of RM6.75. We believe in TM’s convergence aspiration. With its prudent cost approach and the absence of the traditional marketing structure, we think it could capitalize on its dominant platform.
Source: BIMB Securities Research - 28 Feb 2018
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TMCreated by kltrader | Aug 19, 2024
Created by kltrader | Aug 12, 2024
Created by kltrader | Aug 12, 2024