RHB Investment Research Reports

Telecommunications - 2Q24 Read Throughs

rhbinvest
Publish date: Wed, 04 Sep 2024, 09:13 AM
rhbinvest
0 4,504
An official blog in I3investor to publish research reports provided by RHB Research team.

All materials published here are prepared by RHB Investment Bank Bhd. For latest offers on RHB Invest trading products and news, please refer to: http://www.rhbinvest.com

RHB Investment Bank Bhd
Level 3A, Tower One, RHB Centre
Jalan Tun Razak
Kuala Lumpur
Malaysia

Tel : +(60) 3 9280 8888
Fax : +(60) 3 9200 2216
  • Preferred picks: Axiata Group, CelcomDigi (CDB), and OCK Group (OCK). 2Q24 core results of the telcos were steady on good cost controls, improved CDB merger synergies, and tight competition. MNOs continue to slug it out on fibre-mobile bundles with lower ARPU from entry level plans. We lifted our forecasts on CDB and Maxis post results while estimates were lowered for OCK. Key risks are competition, weaker-than-expected earnings, and regulatory setbacks. Maintain NEUTRAL.
  • Broadly in line. Axiata was the sole outperformer in the June reporting season while OCK fell short of our and consensus numbers. Axiata’s earnings were bolstered by the strong operating performance of its mobile assets in Indonesia, Bangladesh, Cambodia and its towerco unit (edotCo) with 1H24 EBIT growth of 40% being ahead of 2024 KPI of mid-teens growth. OCK’s earnings were crimped by weaker billings from the engineering/contracting segment due to the uncertainties on the 5G second network process with the earnings slack to be partly made up for in 2H24. Overall sector core earnings fell 5.4% YoY in 2Q24, mainly due to the high base of Telekom Malaysia’s (TM MK, NR) earnings in FY23 from tax credits and down a marginal 0.4% QoQ.
  • Steady industry mobile revenue; Maxis revenue and EBITDA market share continue to inch higher. Industry mobile revenue (Big-2) ticked up a marginal 0.8% YoY in 1H24 (+0.2% QoQ). The contraction in industry prepaid revenue persisted (-0.6% QoQ, -2% YoY) on the back of SIM consolidation and pre-topost migration. This was offset by higher postpaid growth (+0.8% QoQ, +3.3% YoY). Maxis’ MSR share inched higher to 43.7% in 2Q24 from 43.5% in 1Q24, at the expense of CDB whose MSR share narrowed further to 56.3% from 56.5% in 1Q24. This came from a 2% QoQ decline in prepaid revenue as subs churn more than double sequentially from higher SIM rotation. On EBITDA market share (EMS) (Big-2), Maxis’ EMS improved for the third quarter in a row to 42.8% (1Q24: 41.4%) while CDB’s slipped marginally to 57.2% in 2Q24 from 58.6% in 1Q24. Based on media reports, 5G subs (4G subs included) have exceeded 14m at end-May or c.41% of the population (c.28% of subs base).
  • Fibre broadband (FBB) competition stays keen. With MNOs aggressively upselling/cross-selling FBB packages, TM’s share of industry FBB net-adds have decelerated, with lower net-adds of c.10k/quarter on average in 1H24 vs 34k/quarter in FY23.
  • Second 5G network evaluation ongoing. Four MNOs have submitted their tender for 5G spectrum (TM, Maxis, CDB, and U Mobile). The outcome is expected by 4Q24 with spectrum to be awarded on an apparatus assignment basis. We see Maxis as a front-runner for the second 5G network. With TM’s share subscription agreement for Digital Nasional Berhad (DNB) terminated, it is likely that TM’s tender submission will be disqualified. Management believes it can still play a significant role in the nation’s 5G eco-system by being a 5G access seeker. TM’s non-participation in DNB’s equity and/or the second 5G network is not a concern, as it would be better off providing wholesale 5G fibre backhaul access to 5G network owners, in our view.

Source: RHB Securities Research - 4 Sept 2024

Related Stocks
Market Buzz
Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment