TM’s FY21 core PATAMI of RM1.1bn (+15% YoY) matched expectations. Majority of products recorded higher contributions in FY21 and bottom line improved thanks to efficiency gain. Unifi added 154k subs more than sufficient to offset Streamyx’s attrition of 64k, while both ARPUs trended positively in 4Q21. FY22 guidance which implies growth on the back of prudent CAPEX. Reiterate BUY on the back of lower DCF-derived TP of RM7.26. Leveraging on its extensive fibre reach, TM is perceived to be the critical fundamental building block of government’s 5G rollout under MyDigital.

Within expectations. 4Q21 core net profit of RM251m (-18% QoQ, +29% YoY) brought FY21 sum to RM1.1bn (+15% YoY) which matched our and consensus estimates at 103% and 101%, respectively. FY21 core earnings was arrived after excluding impairment loss of RM122m and other one-offs which mainly comprises of forex loss which amounted to RM124m.

Dividend. Declared final interim single-tier cash DPS of 6.0 sen (4Q20: 7.5 sen) which goes ex on 14 Mar. FY21 DPS amounted to 13.0 sen (FY20: 14.3 sen).

QoQ. Top line gained 13% as the expansions in Others (+42%), Data (+24%) and Internet (+3%) were more than sufficient to offset the decline in Voice (-6%). However, core net profit fell by 18% due to higher D&A and higher effective corporate tax rate.

YoY. Sales strengthened by 5% as the gains in Internet (+11%) and Data (+13%) were partly neutralized by Voice (-3%) and Others (-5%). Post adjustment, core earnings improved 29% thanks efficiency gain where EBITDA margin +3.3ppt.

YTD. Turnover grew 6% supported by higher contributions from majority of products: Internet (+8%), Data (+11%) and Others (+4%), while Voice was flat. In turn, core PATAMI was boosted by 15% on the back of leaner cost structure.

unifi and Streamyx. 154k new unifi subs in 4Q21 and lifted total base to 2.5m, yet ARPU was higher at RM141 (+RM3 QoQ). Copper broadband quarterly churn was 64k subs QoQ and ended the quarter with 278k subs. At the same time, ARPU trended slightly higher at RM93.

FY22 guidance. (1) Revenue growth: low to mid-single digit growth; (2) EBIT: more than RM1.8bn; and (3) Capex: 14%-18% of revenue.

Forecast. Reassess our model base on the new guidance. As a result, FY22-23 earnings projection are lowered by -7% and -8%, respectively. Reiterate BUY on the back of lower DCF-derived TP of RM7.26 (previously RM7.93) with WACC of 7.7% and TG of 0.8%. We are particularly positive on its cost optimization measures which is now yielding an impactful outcome. Leveraging on its extensive fibre reach, TM is perceived to be the critical fundamental building block of government’s 5G rollout under MyDigital initiative. Furthermore, TM is well positioned as the sole Malaysian Cloud Service Provider when sovereignty is the utmost important in dealing with government’s data.

Source: Hong Leong Investment Bank Research - 28 Feb 2022