MFL's claim on TM poses downside risk to headline profit

KUALA LUMPUR: PublicInvest research believes the RM480mil legal claim by Malaysian Football League on Telekom Malaysia Bhd for the termination of its sponsorship seems a little far-fetched.

In a Friday note, the research house said it believes TM would have assessed the risks and taken into consideration the necessary terms and conditions prior to terminating the contract.

While PublicInvest maintains its earnings forecast it sees downside risk to headline profit in the event TM fails to defend itself.

"Although we maintain our Neutral rating on TM (DCF-based TP at RM3.60), we believe this could be a drag on its share price performance in the near term as the legal proceeding could be a long- drawn issue and settlement is not likely to be reached anytime soon," it said.

To recap, TM had said in a stock exchange filing that both parties were unable to mutually agree on several fundamental commercial terms for the intended collaboration.

MFL's claim on TM include RM186.84mil due for season 2018,cost incurred by MFL for the removal of all TM’s unifi marks and/or references to TM from all of MFL’s property and merchandise, RM51.7m being payment for the sponsorship and broadcast consideration for year 2019 and RM376.6m being the remaining consideration for years 2020-2025.