Period  4Q12/FY12

Actual vs. Expectations TM's FY12 core NP of RM881m came in above expectations and accounted for 109% and 106% of ours and the street's full-year estimates respectively. The better than expected results were mainly due to a higher turnover led by its other telco related services segment (i.e. one-off projects, which are not sustainable) and lower tax expenses.

Dividends  The company declared a 12.2 sen final dividend, which targeted to be made in June, bringing the full-year DPS to 22.0 sen (FY11: 19.6 sen). The FY12 DPS was 8%-11% higher than ours (20.4 sen) as well as the consensus estimate (19.8 sen). No special dividend or capital management plan was announced.

Key Result Highlights YoY, TM's FY12 revenue improved by 9% to RM10.0b, driven by the higher contribution from all its segments, i.e. Data (+10%), Internet (+19%) and other telco related services (+22%) but these were partially offset by the relatively flat Voice (-1%) division. The reported EBITDA grew by 5% to RM3.2b although its margin dipped by 1.5pp to 31.8% due mainly to a higher direct and maintenance cost. Core NP meanwhile rose by 39% to RM881m due to a higher turnover and a lower effective tax rate led by the recognition of deferred tax income on unutilised tax incentives.

 QoQ, the turnover improved by 18% due to the higher revenue from all services. The EBITDA margin dipped to 31.2% (vs. 31.4%) to RM900m as a result of a higher manpower and maintenance cost. The core NP, however, soared by 55% due to a higher operating revenue and lower deferred tax income.

 Unifi's subscribers grew by 13% QoQ to 483k at the end of FY12 with a higher blended ARPU of RM187 (3Q12: RM180). To date, Unifi's subscribers have reached more than 514k, which implied a take-up rate of 35%. Streamyx's subscribership, on the other hand, saw its net adds reduced by 18k to 1.58m with a higher ARPU of RM80 (+RM1 QoQ).

Outlook  TM has introduced its FY13 KPIs, which targets its revenue and EBIT to record 6.0% and 3.0% in annual growth rates respectively.

Change to Forecasts  Lowered our FY13 (-6.1%) and FY14 (-3.7%) core NPs after taking the FY13 KPIs into consideration and imputing in higher direct and manpower costs as well as a higher effective tax rate of 28% (vs. 22% previously) as per management guidance.

Rating Maintain OUTPERFORM

Valuation  We have lowered our TM TP to RM6.68 (from RM6.80 previously) based on an unchanged targeted EV/forward EBITDA of 8.2x (+2.0x SD).

Risks  Regulation risk and persisting margin pressure.

Source: Kenanga