Results

• Higher earnings - TM’s 2Q17 normalised PATAMI increased 24.2% YoY to RM208m following forex gain, lower depreciation and lower tax. Including the impact of forex, reported PATAMI surged 50.9% YoY to RM210.5m.

• Revenue declined - 2Q17 revenue dropped 2.1% YoY to RM2.98bn as higher contribution from Internet (+8.5% YoY) was overshadowed by declines in Data (-6.4% YoY), Voice (- 4.7% YoY) and Others (-9.5% YoY).

• Lower QoQ – 2Q17 reported PATAMI declined 8.7% QoQ while normalised PATAMI dropped 9.5% QoQ after removing forex impact. Revenue increased slightly by 0.5% QoQ following modest growth in Internet, Data and Others.

• Drop in subscribers – Total broadband subscribers dropped 0.5% QoQ to 2.359m as UniFi subscribers grew 12% YoY and 3% QoQ to 1.007m but Streamyx subs declined 7.7% YoY and 2.8% QoQ to 1.35m. UniFi subscriber growth is expected to continue with the ongoing implementation of HSBB2 and SUBB. TM will also be rolling out fibre in high-rise residential to compete with TIME Fibre.

• Flat ARPU– TM’s Average Revenue Per User (ARPU) for Streamyx broadband was unchanged at RM90, while ARPU for UniFi was slightly lower at RM200 vs RM200 in 1Q17.

• Webe progress – After its retail launch in September 2016, Webe has now achieved 5.6% of TM household penetration.

Earnings Outlook/Revision

• Earnings within expectation – First half normalized PATAMI and revenue accounted for 47% and 47% of our full year estimates respectively as we expect earnings to pick up in 2H17.

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

• TM has announced its first interim dividend of 9.4 sen/share. We expect full year dividend of 23.7 sen/share, translating into a yield of 3.7%.

Valuation & Recommendation

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

Source: JF Apex Securities Research - 30 Aug 2017