KUALA LUMPUR: Kenanga Investment Bank (Kenanga IB) has maintained its "outperform" rating for Telekom Malaysia Bhd (TM) although it sees only a marginal contribution from the RM1.25 billion emergency services contract extension the company got from the government.

The contract is for TM to implement the Next Generation Emergency Services 999 (NG999) strategic digital platform for 12 years until 2036.

Kenanga IB said that based on its estimates, the contract will contribute 0.3 to 1.4 per cent to TM's financial year 2024 (FY2024) and FY2025 earnings, respectively.

"We like TM (as it is) leveraged towards secular data growth on the back of current trends such as digital transformation, the proliferation of the Internet of Things (IoT) and cloud-based applications powered by generative artificial intelligence (AI).

"It is benefitting from JENDELA phase 2 projects via rollout and monetisation opportunities, earnings accretion from new DC (direct current) business, and higher demand for data transmission via its network of digital infrastructure that includes submarine cables and landings as well as fibre optics backhaul," it said in a note.

Hence, Kenanga IB has maintained its trading rating with a target price of RM7.53.

Meanwhile, MIDF Amanah Investment Bank Bhd made no changes to its earnings estimates for TM at this juncture given that the concession is a continuation of the previous project.

The investment bank, in referring to the latest 2023 annual report, said TM is looking to further accelerate its current endeavours in AI this year, which range from enriching customer experiences to optimising operational processes. "As such, we could expect more of such project wins moving forward," it said, adding that it maintained a "neutral" recommendation on TM with an unchanged target price of RM7.03.

At 10.25 am, TM dropped three sen to RM6.75 with 939,800 shares traded.