• Overview. 2Q19 core profit slipped 15% yoy and 2% qoq on easing wholesale revenue due to expiring network sharing agreement.

• Key highlights. 2Q19 wholesale revenue saw significant decline of 72% yoy and 52% qoq. Meanwhile, its ex-wholesale revenue came in flat as growth in postpaid subs was offset by decline in prepaid subs and Mobile Termination Rates (MTR).

• Against estimates: inline. 1H19 core profit fell 19% on lower service revenue coupled with higher direct and staff costs, which was likely on scaling up Enterprise offerings, we believe. Nevertheless, it made up 52% and 50% of ours and consensus estimates respectively.

• Dividend. A 5.0 sen DPS was declared implying 98.5% dividend payout. This brings total 1H19 DPS to 10 sen.

• Outlook. We reckon the accelerated execution could pressure margins in the near term. However, this could be mitigated by strong take up of Hotlink Flex which could improve blended ARPU and subscribers’ stickiness.

• Our call. Maintain HOLD with a DCF-derived TP of RM5.00. We opine the execution risk of its growth strategy is heightened by intensified competition amidst the entrance of a new player. Sell on strength

Source: BIMB Securities Research - 5 Aug 2019