Review

• TM’s 9MFY24 core profit of RM1,419mn came in within ours but above consensus’ expectations, accounting for 79.7% and 87.2% of ours and consensus’ full-year estimates.

• YoY, 9MFY24’s normalised EBITDA jumped 4.6% to RM3,548mn, despite revenue being 0.4% lower at RM8,662mn. Continuous business improvements, better operational efficiency and effective cost management mainly drove the higher normalised EBITDA. Meanwhile, although TM One recorded higher revenue of RM2,124mn (+2.0% YoY), this was offset by the decline in Unifi revenue, which amounted to RM4,179mn (-1.8% YoY), and TM Global revenue of RM2,281mn (-1.0% YoY), respectively.

• The higher revenue from TM One was primarily driven by increased customer projects and other telecommunications services. On the other hand, the decline in revenue for Unifi was largely attributed to promotional discounts and lower demand for voice and mobile services. Meanwhile, the decrease in revenue for TM Global was mainly due to reduced global voice traffic and lower-managed wavelength services. With the absence of tax credit, core net profit dropped 4.6% to RM1,419mn.

• QoQ, 3QFY24’s revenue grew 0.3% to RM2,917mn, while normalised EBITDA jumped 4.9% to RM1,207mn. The Unifi segment continued its fixed broadband subscriber acquisition trajectory with net adds of 24k QoQ to a new high of 3,167k.

Outlook

• Management’s guidance for FY24 was largely unchanged, with EBIT should be around RM2.1 to RM2.2bn. Meanwhile, the group intends to take a more proactive approach to boost revenue through fixed-mobile convergence and leverage new technologies to enhance customer experiences.

Impact

• Maintain our FY24 to FY26 earnings forecasts.

Valuation

• No change to our target price of RM7.93, based on a DCF valuation with a WACC of 8.5%, a long-term growth rate of 2.0%, and a 3% ESG premium. Maintain a Buy call on the stock.

Source: TA Research - 27 Nov 2024