• Maintain BUY (TP: RM7.00). TM’s 9MFY23 top-line was flattish, slightly declined by -0.1% YoY, in-line with our expectation accounting for 73.4%. Nonetheless, TM’s 9MFY23 net profit of RM1,437mn (+46.2% YoY) was above ours and consensus expectations, accounting for 114% and 94% respectively. The deviation against our projection was primarily due to lower-than-expected tax and depreciation in the current quarter. The group’s 3QFY23, revenue down by -2.6% YoY. Meanwhile, the group’s net profit rose by >100% YoY on the back of lower net finance cost and the recognition of tax credits from the utilisation of previously unrecognised tax losses. All in all, we remain bullish on TM's business prospects, particularly in the Unifi and TM Wholesale divisions. Maintain a BUY call with a higher TP of RM7.00 (from RM6.97). Our valuation is derived based on DCF valuation with a WACC of 7.4% and a long-term growth of 1.0%.

• Key highlights. TM’s revenue decreased by -2.6% YoY in 3Q23 attributed to lower revenue contribution from voice, data and other telecommunicationrelated services. However, the group’s net profit rose by >100% YoY on the back of lower net finance cost and the recognition of tax credits from the utilisation of previously unrecognised tax losses. It is worth to note that Unifi business recorded higher revenue contribution by +0.7% YoY primarily attributed to the Internet sector, aligning with the sustained growth in cumulative fixed broadband subscribers. On QoQ basis, TM’s bottom-line decreased by -5.4% QoQ due to lower operating profit and lower net tax credit.

• Earnings Revision. We have raised our FY23-25F forecasts by 22.9%, 15.0%, and 3.0% to account for the changes in tax provision, as new information from TM indicates that the tax provision will remain low in the next few quarters.

• Outlook. We think that TM will continue to benefit from DNB's 4G and 5G network infrastructure development, capitalising on TM's extensive nationwide network infrastructure. Despite a flattish Unifi AAPU in the current quarter, we believe that TM will maintain resilient earnings in 4Q23, supported by the expectation of a low tax provision.

Source: BIMB Securities Research - 24 Nov 2023