Results

• FY15 revenue of RM11.7bn was translated into a core net profit of RM899.8m, accounting for 102% and 103% of HLIB and consensus full year estimates, respectively.

Deviation

• Within expectations.

Dividend

• Declared 2nd interim single-tier dividend of 12.1 sen (4Q14: 13.4 sen) per share, which will go ex on 8 Mar.

• FY15 dividend amounted to 21.4 sen (FY14: 22.9 sen) per share, in line with our expectations.

Highlights

• Ex P1, TM concluded FY15 satisfactorily despite missing its own top line growth KPI.

• All products expanded in FY15, with Internet being the most outstanding with 12.4% yoy growth to account for 28.7% of group sales, soon to surpass Voice as the main contributor.

• This was attributable to UniFi, which regained momentum with 46k net adds in 4Q15 elevating total base to 839k, representing 44% adoption rate of on the back of 1.89m ports. ARPU was resilient at RM190 as 46% of the base are on packages of 10Mbps and above after the launch of all new UniFi and UniFi Advance packages last October.

• Streamyx base stabilized with 1.5m subs with stronger ARPU of RM89 as 56% of broadband customers are on packages of 4Mbps and above.

• P1 continued to weigh on TM’s earnings with FY15 EBIT loss of RM288.6m on the back of RM231.1m revenue.

• Headline KPIs and management guidance (excluding P1): 2016 2018 Revenue growth (%) 3.0 - 3.5 3.5 – 4.0 EBIT growth (%) FY15 RM Level 3.0 – 5.0

• FY16 CAPEX will be high, budgeted at 25-30% of revenue mainly fund HSBB2, SUBB, LTE and SKR1M projects.

Catalyst

• Earnings uplift from HSBB and ICT-BPO.

• LTE node fiberization.

Risks

• Appreciation of USD, regulatory risks, irrational competition and acceleration of global bandwidth price erosion.

Forecasts

• Tweaked CAPEX based on guidance which in turn led to FY16-17 EPS revision by -9.4% and -11.4%, respectively.

Rating

• HOLD , TP: RM6.89

Positives

• Earnings uplift mainly from HSBB, ICT-BPO, near monopoly of fixed telco market in Malaysia.

Negatives

• Unattractive pricing could limit wholesale growth. HSBB equipment subsidy.

Valuation

• Reiterate HOLD with a slightly lower DDM-derived TP of RM6.89 (RM6.90 previously) based on unchanged WACC of 5.8% and TG of 0.5%.

Source: Hong Leong Investment Bank Research - 25 Feb 2016