Results

• TM’s 1Q17 normalised PATAMI increased 13.2% YoY to RM229.8m on the back of higher revenue and improved margins after lower overall costs. Including the impact of forex, reported PATAMI declined 28.5% YoY to RM230.4m.

• Higher revenue - 1Q17 revenue improved 3.8% YoY to RM2.96bn as higher contribution from Internet (+8.4% YoY), Data (+3.3% YoY) and Others (+12.4% YoY) eclipsed the decline in Voice (-5.3%) revenue.

• Lower QoQ – 1Q17 reported PATAMI surged 49% QoQ while normalised PATAMI dropped 15% QoQ after removing forex impact. Revenue declined 8.4% QoQ as sales from all divisions declined except Internet.

• Flat subscriber growth – Total broadband subscribers were flat at 2.37m as UniFi subscribers grew 11.6% YoY and 3% QoQ to 979k while Streamyx subs declined 6.5% YoY and 2.1% QoQ to 1.39m as subscribers migrate to UniFi. UniFi subscriber growth is expected to accelerate with the ongoing implementation of HSBB2 and SUBB.

• Higher ARPU– TM’s Average Revenue Per User (ARPU) for Streamyx broadband was slightly lower at RM90 (vs RM92 in 4Q16). ARPU for UniFi was maintained at RM201.

• Webe progress – After its retail launch in September, Webe launched new mobile and broadband products for SMEs last month. The management targets to increase nationwide penetration rate to 8% to 10% by end-2017.

Earnings Outlook/Revision

• Earnings within expectation – First quarter normalized PATAMI and revenue accounted for 23% and 24% of our full year estimates respectively.

• Estimates maintained– We are maintaining our EPS forecast for FY17 and FY18. Long-term prospect is supported by the rollout of UniFi to suburban areas under HSBB2 and SUBB.

Valuation & Recommendation

• Maintain HOLD with an unchanged target price of RM6.66 based on DDM valuation.

Source: JF Apex Securities Research - 24 May 2017