• Overview. 3Q19 EBITDA surged 29% qoq and 19% yoy on better cost management from XL, Celcom and Robi. However, core profit was down by 20% yoy due to higher taxes and MI.

• Key highlights. On yoy basis, revenue improved as ARPU for Celcom, XL and Robi (Table 3) increased. This has resulted in EBITDA margin expanding 8.9ppts to 45% from 36% aided by lower cost.

• Against estimates: below. At the EBITDA level, 9M19 performance was broadly inline with our estimates but higher tax expense pushed core estimates down. Overall, core earnings trailed ours and consensus’ estimates at 48% and 61% respectively. We revised our FY19/20/21F earnings by -34%/-35%/-34% (Table 4) adjusting for cost, depreciation and tax assumptions.

• Outlook. Management noted that EBITDA growth would be stronger, i.e. by double-digit and exceed 2019F EBITDA growth guidance mainly due to its cost excellence programme.

• Our call. Maintain HOLD with lower TP of RM4.00 TP (from RM4.25) which implies an FY20/21F PE of 37x/33x.

Source: BIMB Securities Research - 29 Nov 2019