• Maintain BUY (TP: RM7.77). TM's 1HFY24 revenue remained flat, which aligned closely with our anticipated figure at 44% of FY24F estimate. However, net profit declined 8.6% YoY to RM821mn which is inline with both our and consensus’ estimate at 55% and 51% respectively. The group declared a higher interim dividend of 12.5sen per ordinary share in 1HFY24, as compared to 9.5sen in 1HFY23. Despite the relatively lower Unifi ARPU this quarter, it is expected to stabilize in coming quarters through the introduction of UniVerse campaign and the new mobile UNI5G WOW. Maintain a BUY call with an unchanged TP of RM7.77. Our valuation is derived based on DCF valuation with a WACC of 7.4% and a long-term growth of 2.0%.

• Key highlights. Segment-wise, Unifi's business recorded a slight decline in revenue, down by 0.7% QoQ and 1.6% YoY, primarily due to (i) promotional discounts, (ii) an increase in new subscribers opting for entry-level packages, and (iii) lower revenue from voice and mobile services. However, Unifi's subscribers grew by 1.2% YoY, reaching 3.14mn subscribers. TM Global posted higher revenue of RM752mn (+1.2% QoQ), driven by increased revenue from managed wavelength and domestic data, while YoY revenue declined due to a decrease in global voice traffic.

• Earnings Revision. No change to our forecast.

• Outlook. To recap, TM has announced that its agreement to acquire a stake in Digital Nasional Bhd (DNB) was terminated after DNB declined TM's request for additional time to secure shareholder approval. Note that TM will continue to provide 5G services through its existing access agreement (AA) with DNB, which remains valid for 10 years. We view this development positively, as it allows TM to focus on its core strengths. TM is wellpositioned to capitalize on the growing demand for 5G by offering critical infrastructure, such as fibre optic backhaul, without the financial burden of owning a stake in the 5G network. Regarding TM’s participation in the second 5G network, the group has submitted its proposal for the Application Information Package (AIP) and is awaiting the outcome of the review from the Malaysian Communications and Multimedia Commission (MCMC). As for TM's joint venture with Singtel, TM has guided that the group will finalize the joint venture agreement by the fourth quarter of this year, and contracts are expected to be announced next year. Despite the relatively lower Unifi ARPU this quarter, TM is expected to stabilize it in the coming quarters through the introduction of its recent UniVerse campaign and the new mobile UNI5G WOW. We believe the UniVerse campaign, (launched in May 2024) will drive higher adoption and revenue growth for Unifi Mobile in the upcoming quarter.

Source: BIMB Securities Research - 27 Aug 2024