We continue to expect strong unifi subscriber growth in the coming quarters as home fibre continues to gain traction amidst extended lockdowns. Moving forward, despite future ARPU dilution, we think the strong subs base growth will continue to lift unifi’s revenue. BUY with TP of RM7.00. We think the market is underappreciating the tailwind behind TM, benefitting from both extended lockdowns and from a secular growth trend, as TM's assets stand to benefit from consumers and enterprises' increasingly digital lifestyles and greater data consumption.

TM rollout via the JENDELA (National Digital Infrastructure plan) exceeded its target mainly driven by strong fibre broadband demand. Thus, we expect a healthy portion of their new premises passed to translate into unifi subs. That said, TM is increasingly targeting the M40 group as the T20 group becomes saturated. This focus on the mass market will gradually dilute unifi ARPU as a larger customer base could skew towards entry level products.

While TM is acquiring new fibre broadband subs, their expanding fibre coverage also allows existing Streamyx users to convert to unifi. This should provide cushion to said dilution, as unifi fetches c.60% higher ARPU than Streamyx. Furthermore, as unifi subs found themselves needing higher speeds and data quotas during lockdowns, there have been plan upgrades among the unifi subs, further lifting unifi's ARPU. Collectively, this ties in with our FY21E/FY22E unifi ARPU forecast of -4%/-3%.

We foresee the strong unifi subs growth (average 8% Q/Q in coming quarters) to continue lifting TM's unifi revenue. For comparison, unifi subs base rose by an average of 3% Q/Q preCovid. We maintain our estimates as TM is performing as expected. We continue to favor TM as our top telco pick on the back of: (i) continued strong growth in its home broadband business, (ii) increased wholesale lease revenue from other telcos' FTTH growth, (iii) greater OTT reliance on its submarine cables, and (iv) growth in cloud and data centre services from enterprises' digital adoption.

Source: Rakuten Research - 21 Jul 2021