• Overview. Telekom Malaysia Berhad (TM) recorded a decent FY22  performance amid revenue and PATAMI that were up by 5.1% and 27.7%  YoY. The results were supported by better contribution from all business clusters (Unifi: +7.7%, TM One: +0.5%, TM Global: +7.8%). On quarterly basis, TM’s revenue decreased by 5.5% YoY however, dragged by lower contribution from other telecommunication related services, voice and data in 4Q22. PATAMI that was up by >100% YoY was also pushed by foreign exchange gain and lower finance costs.

• Key Highlight. ARPU of Streamyx increased by 21.5% YoY to RM113 in 4Q22,  thanks to TM’s Year End promotions, aggressive sales and retention programs.

• Against estimates: In-line. TM’s 2022 PATAMI of RM1,143mn was in-line our and consensus forecast, accounting >100%, of FY22 forecast.

• Dividend. The group declared a final interim dividend of 7.5 sen for FY22  (FY21: 6.0sen), bringing cumulative dividend to 16.5 sen for FY22  (FY21:13.0sen) equivalent to a yield of 3% based on current market price.

• Outlook. We remain bullish on TM’s business prospects namely Unifi, TM  One and TM Wholesale divisions. With positive development of 5G in  Malaysia we foresee more stable earnings growth in the long run backed by the enhancement of 5G related products. 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. Aside to that we opine that TM will continue to benefit from its cost optimisation effort. Downside risk to our call includes tighter competition from other service providers in terms of pricing and network stability – risking potential downward earnings contribution from Unifi segments.

• 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 - 1 Mar 2023