• Overview. Telekom Malaysia Berhad (TM) recorded a resilient 2Q22 performance amid revenue and PATAMI that surged by 11.8% and 73% YoY. The results were driven by inspiring contribution from all business clusters (Unifi: +13.8%, TM One: +4.1%, TM Wholesale: +29.6%). Despite higher depreciation and amortisation cost (+3% QoQ), interest expenses (7.9% QoQ), and taxation rate (+30% QoQ) from Cukai Makmur, TM’s revenue and PATAMI soared steadily by 6.8% and 11.3% QoQ, thanks to improved revenue contribution from all product lines including Voice (+6.8% QoQ), Data (+10.3% QoQ) and Internet (+1.1% QoQ) underpinned by an increase in fixed broadband customer base to 2.9mn from 2.3mn (+2.5% QoQ).

• Key Highlight. The average revenue per user (ARPU) of Unifi increased by 1% QoQ to RM137, thanks to TM’s effective promotions and marketing approach to secure new consumers through cheaper broadband package plan.

• Against estimates: Above. TM’s 1H22 PATAMI of RM718mn (+32% YoY) was above our forecast and consensus after accounting 62.7% and 64.3%, of full year forecast respectively.

• Dividend. The board declared an interim dividend of 9.0 sen (2Q21: 7.0 sen), equivalent to a DY of 1.59 % based on the current market price.

• Outlook. We remain upbeat on TM’s business prospects namely Unifi, TM One and TM Wholesale divisions. Unifi's subscribers are also expected to expand (+2.5% QoQ, +14.1% YoY), which includes retailers and enterprises as people embrace digital domain post-pandemic. TM Wholesale will remain as the beneficiary of 4G and 5G network infrastructure development by Digital Nasional Berhad (DNB) thanks to TM’s extensive network infrastructure nationwide. As for TM One, we anticipate the cluster to continue to show positive contribution given burgeoning take up rate for cloud and digital services from the private as well as public sector.

• Our call. Maintain a BUY call with a TP of RM7.58 based on DCF-derived (WACC:7.4%, g:1%).

Source: BIMB Securities Research - 25 Aug 2022