Results

• Lower Earnings– TM’s 3Q22 PATAMI slipped 2.2% YoY to RM265m due to higher direct cost (+23% YoY to RM944.1m), as a result of higher forex loss on borrowing by RM66.7m, and higher tax rate of 33% (Cukai Makmur).

• Higher revenue – 3Q22 revenue rose 12.7% YoY to RM3.16b as growth in Internet (+7% to RM1.09b), Data (+26% to RM903m) and Others (+27% to RM548m) cushioned the decline in Voice revenue (- 3% to RM616m). The commendable performance was due to higher Unifi broadband subscribers, higher demand for data and higher business solutions and ICT services and higher infra sharing from its wholesale customers.

• Declined QoQ earnings – TM’s 3Q22 PATAMI of RM265m declined 30% QoQ mainly due to higher direct cost (+20% QoQ) . Quarterly revenue rose 2% QoQ to RM3.16b as revenue all segments increased except for Voice.

• Record high unifi subscribers – Total broadband subscribers increased 11% YoY and 2% QoQ to 2.98m as UniFi subscribers grew 23% YoY and 4% QoQ to a record 2.875m to cushion the decline in Streamyx subs which decreased 69% YoY and 33% QoQ to 106k.

• Mixed ARPUs – TM’s Average Revenue Per User (ARPU) for Streamyx broadband was higher QoQ at RM100 vs RM97 in 2Q22 while ARPU for UniFi slipped to RM132 vs RM137 in 2Q22.

• Better gearing – Net debt/EBITDA was lower at 1.09x vs 1.18x in 2Q22 while free cash flow stands at RM1.91b vs RM1.39b in 2Q22.

Earnings Outlook/Revision

• Within expectation – 9M22 PATAMI achieved 73% of our full year estimate while quarterly revenue was within expectation after accounting for 78.5% of our FY22 forecast. As such, we are keeping our forecasts for FY22 and FY23.

• Key beneficiary – We are positive on the stock as TM is a key beneficiary of JENDELA and DNB 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 RM6.55. The fair value is based on DCF with assumption of 0.5% terminal growth and 9.4% discount rate.

Source: JF Apex Securities Research - 23 Nov 2022