• Maintain BUY (TP: RM7.78). TM's 9MFY24 revenue remained relatively flat, showing a slight decrease of 0.4% YoY. However, TM's 9MFY24 net profit declined to RM1,286mn, marking a significant YoY decrease of 10.5% YoY, above our expectations but within consensus estimates at 87% and 79% respectively. This variance from our projection was primarily attributed to lower-than-anticipated depreciation & amortisation in the current quarter. Note that the group’s depreciation & amortisation were down by 10.7% YoY in 9MFY24 due to impairment and accelerated depreciation in 2023. Maintain a BUY call with a higher TP of RM7.78 (from RM7.77). Our valuation is derived based on DCF valuation with a WACC of 7.4% and a long-term growth of 2.0%.

• Key Highlights. Segment-wise, Unifi's business recorded a slight decline in revenue, down by 1.0% YoY in 3QFY24, primarily due to (i) promotional discounts, (ii) an increase in new subscribers opting for entry-level packages, and (iii) lower revenue from voice and mobile services. However, Unifi's subscribers grew by 1.6% YoY, reaching 3.17mn subscribers. TM Global posted lower revenue of RM787mn (-3.9% YoY), on the back of lower global voice traffic and lower Managed Wavelength during the period.

• Earnings Revision. We revised our FY24-FY26F earnings forecast higher by 3.5%/2.4%/1.7% respectively, as we revised our depreciation & amortisation assumptions.

• Outlook. Despite a slight decline in Unifi ARPU this quarter (RM130 in 3Q24 vs. RM131 in 3Q23), TM is anticipated to stabilize it in the coming quarters, supported by the recent UniVerse campaign and the new UNI5G WOW mobile plan. The UniVerse campaign is expected to improve adoption and revenue growth for Unifi Mobile in the next quarter. It is also worth to note that, Unifi Business's partnership with TNG Digital aims to accelerate 5G adoption and enhance eWallet solutions for MSMEs in Malaysia.

Source: BIMB Securities Research - 27 Nov 2024