TdC’s FY22 core net profit of RM398m (+4 YoY) matched expectations. In FY22, turnover grew 11% thanks to higher contributions from Data (+14%) and Data Centre (+16%), more than sufficient to offset contraction in Voice (-20%). Regional associates contributed a total of RM23m (-4% YoY) in FY22. It is on track to complete the strategic partnership for AIMS’ regional expansion. Reiterate HOLD with unchanged SOP-derived TP of RM4.90.

In line. 4Q22 core PAT of RM103m (-1% QoQ, -3% YoY) brought FY22’s to RM398m (+4% YoY) which matched expectations, accounting for 96% of HLIB and consensus full-year estimates, respectively. FY22 one-off adjustments include net bad debt recovered (-RM1.5m), forex gain (-RM28.8m), net allowance for doubtful debts (+RM13.3m), PPE disposal gain (-RM1.5m), PPE written off (+RM1.1m) and net impairment for construction deposit (+RM1.6m).

Dividend. Declared interim and a special interim tax exempt (single tier) DPS of 12.33 sen and 2.36 sen (4Q21: 10.86 and 2.29 sen), both go ex on 14 Mar. Together with the special DPS paid on 27 Sep 2022, FY22 DPS amounted to 31.03 sen (FY21: 21.37 sen).

QoQ. Due to the announced and impending divestment of stakes in AIMS, it is treated as assets held for sale and disclosed as discontinued operations. In turn, top line lost 3%. Revenue growth breakdown: Data (+8%), Data Centre (-8%) and Voice (+8%). In turn, core net profit decreased by 1%.

YoY. Turnover grew 7% supported by higher contributions from Data (+20%) and Data Centre (+2%), more than sufficient to offset Voice contraction (-4%). However, core PATAMI fell by 3% attributable to (i) lower EBITDA margin; and (ii) higher corporate tax (+16%).

YTD. Revenue grew 11% to RM1.5bn driven by the improvements from both Data (+14%) and Data Centre (+16%), more than sufficient to neutralize Voice’s decline (-20%). With lower EBITDA margin, core earnings gained at slower pace of 4% to RM398m.

Regional associates. CMC (Vietnam) and Symphony (Thailand) were profitable and contributed RM23m (-4% YoY) to FY22’s bottom line.

Outlook. TdC will continue to strengthen network quality and expansion of footprint to meet demand. It is on track to complete the strategic partnership for AIMS’ regional expansion.

Forecast. Unchanged.

Reiterate HOLD with unchanged SOP-derived TP of RM4.90. Its domestic telco business is valued via DCF with WACC of 8.2% and TG of 1.5%. We like TdC as its retail is gaining momentum on the back of reach expansion and undisputable high value products. Also, data centre is expanding resiliently as IT outsourcing, cloud computing and virtualization are widely adopted. However, we opine that the risk and reward is balanced at current juncture.

Source: Hong Leong Investment Bank Research - 1 Mar 2023