Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: OSK

KUALA LUMPUR:'' OSK Research maintains its NEUTRAL recommendation on Telekom Malaysia on lingering concerns over the erosion of its traditional voice business (45% of revenue) and its premium valuations against the KLCI/local peers.

The research house said on Friday, Aug 20 that TM will announce its 2QFY10 results on Monday, to be followed by a conference call.

'We expect EBITDA margin to come under pressure from (i) higher HSBB related opex; and (ii) increased marketing spending. TM slugged it out to defend its ADSL broadband business, drive take-up of its bundled voice packages and introduced the new HSBB (Unifi) service in 2Q10,' it said.

OSK Research said TM will recognise the full quarter opex relating to its high speed broadband service (launched late March) in 2Q10. As a result, we expect its core EBITDA to slide q-o-q/y-o-y in 2Q10.

The group posted flat EBITDA of RM731m in 1Q10 due to start-up costs for Unifi while revenue fell 7% q-o-q (+1% y-o-y) following the lumpy project sales recognition in 4Q09.

'We expect 2Q10 revenue to show a slight recovery as the strong ADSL net-add momentum extended into 2Q10, albeit partially offset by the dilution in overall voice revenue as TM offered free local calls on its new bundled voice packages,' it said.