Declined earnings – TM’s 2Q21 reported net profit dropped 21% YoY to RM218.5m while normalized PATAMI declined 4.7% YoY to RM255m due to higher other opex by RM108m which included provisions under the group’s manpower optimisation initiatives.
Steady revenue – 2Q21 revenue rose 6.6% YoY to RM2.76b due to YoY growth in all business segments: Voice (+2.1% to RM584m), Data (+6.1% to RM747m), Internet (+7.9% to RM994m and Others (+10.6% to RM437m).
Lower QoQ earnings – TM’s normalised PATAMI of RM255m dropped 23% QoQ amid lower revenue (-1.7% QoQ to RM2.76b) as total costs increased 7.8% QoQ. Revenue from Data (-6.6% QoQ) and Others (-9% QoQ) declined while Internet (+2.1% QoQ) and Voice (+5% QoQ) posted growth.
Subscriber growth momentum – Total broadband subscribers increased 12% YoY and 5% QoQ to 2.56m as UniFi subscribers grew 38% YoY and 10% QoQ to 2.14m to cushion the decline in Streamyx subs which decreased 39% YoY and 15% QoQ to 0.42m.
Lower ARPUs – TM’s Average Revenue Per User (ARPU) for Streamyx broadband was stable QoQ at RM91 while ARPU for UniFi declined to RM141 vs RM144 in 1Q21.
Steady gearing – Net debt/EBITDA was flat at 1.44x (from 1.42x in 1Q21) while cash reserves was stable at RM1.82b vs RM1.84b in 1Q21.
Earnings Outlook/Revision
Within expectation – 1H21 normalized PATAMI achieved 52% of our full year estimate six months’ revenue accounted for 51% of our FY21 forecast.
Estimates maintained – We are keeping our forecasts for FY21 as we view the provision for manpower optimisation as one-off. Earnings momentum will be sustained by strong demand for fixed broadband and ongoing cost optimisation.
Key beneficiary – We are positive on the stock as TM is a key beneficiary of JENDELA plan given its infrastructure of fibre network and submarine cables as well demand for data centres and 5G rollout.
Valuation & Recommendation
Maintain BUY with an unchanged target price of RM6.64. The fair value is based on DCF with assumption of 1.5% terminal growth and 9% discount rate.
Dividend – TM has announced an interim dividend of 7 sen and we expect full year dividend to be 15 sen or 2.5% yield.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....