Period

4Q15/FY15

Actual vs. Expectations

FY15 core PATAMI of RM895m (-5% YoY) came in within expectations, accounted for 104% of our forecast and 103% of the street’s full-year estimate.

KPIs-wise, while TM’s revenue growth of 3.0% came below its FY15 target (4%-4.5%), the group has managed to shine at the EBIT level and delivered 6.2% growth (vs. 4%-4.5% target) for the full financial year. Note that, these headlines KPIs excluded P1 contribution.

Dividends

A final dividend of 12.1 sen was declared, bringing its full-year DPS to 21.4 sen (FY14: 22.9 sen) which translated into 89.9% payout ratio and 3.2% dividend yield.

Key Results Highlights

YoY, FY15 revenue climbed by 4% to RM11.7b, driven by the higher segmental contribution. The group’s EBIT dipped by 3% to RM1.26b due to higher OPEX post consolidation of the operational loss of P1. PATAMI, meanwhile, was lower by 16% to RM700m as a result of forex losses from borrowing arising from the weakening RM. Stripping off the forex impact (RM109m) and MESRA programme (RM59m), its core PATAMI will be lowered to RM895m (-5% YoY)

QoQ, 4Q15 turnover improved by 9%, primarily due to high contribution from all services, except voice services. Its core PATAMI, meanwhile, surged 14% to RM260m after excluding the unrealised forex translation gain of RM16.5m; other losses & impairment of RM24.9m and RM58.8m MESRA Programme cost (net of tax).

Unifi’s subscribers grew by 6% QoQ (or 46k net adds) to 839k representing a take-up rate of 44% at the end of 4Q15 with a slightly lower blended ARPU of RM190 (3Q15: RM192). Streamyx’s subscribership, on the other hand, maintained at 1.5m with a slightly higher ARPU of RM89 (3Q15: RM87), thanks to upselling and higher take-up of high-end packages. As at FY15, 56% (or >1.3m) TM’s total broadband customers are subscribed to 4Mbps and higher packages. As for Unifi subscription base, 46% of Unifi customers are now on packages of 10Mbps and above.

Outlook

TM has introduced its FY16 KPIs, which targets annual revenue growth of 3%-3.5% with normalised EBIT maintained at FY15 level (at c. RM1.52b). The EBIT margin pressure is expected to come from HSBB2 and SUBB projects rollout. Note that, these headlines KPIs exclude P1 contribution.

Change to Forecasts

Trimmed FY16E turnover by 4% on the back of lower Internet segment revenue as we were too bullish previously. EBITDA/core NP also cut by 8%/7%, after raising our OPEX assumptions. Meanwhile, we also take this opportunity to introduce our FY17E numbers.

Rating

Downgrade to MARKET PERFORM

Valuation

Lowered our TP to RM6.92 (from RM7.00 previously) based on targeted FY16 EV/fwd. EBITDA of 7.7x (vs. 7.4x previously), implied an unchanged +1.0x standard deviation above its 4-year mean).

Risks

Regulation risk and persistent margin pressure.

Source: Kenanga Research - 25 Feb 2016