INSTITUTIONAL investors made a fresh pursuit of TELEKOM MALAYSIA BHD shares yesterday, leading the stock to rise 40 sen to RM11, a three-year high.
Telekom, the fourth most actively traded stock, with 8.9 million shares changing hands, had not reached the RM11 level since March 2001.
Its call warrants, however, inched up by only 1 sen yesterday to RM2.01, well below this year's high of RM2.39 reached in February.
The group announced last week a net profit of RM1.46bil, including extraordinary gains, for the half-year ended June 30, 2004.
A fund manager said most stock brokerages had “buy” recommendations on the stock. “If you're looking at the government-linked utilities, between Telekom and Tenaga, it's easier for the management in Telekom to create value,” he added.
In the case of Tenaga National Bhd, 40% of its cashflow had to be channelled to independent power producers, he added.
In contrast, Telekom's holdings of cash, before debts, are estimated at over RM4bil. “Telekom has a debt/equity ratio of around 30% and we expect it to be in a net cash position by 2006,” he said.
Telekom is structurally stronger. It could create value through its mobile network operator, Celcom, and overseas investments, for example, in the partial sale of its investment in South Africa, he added.
Telekom owns a 12% stake in Telkom SA and its sale of 6% of this stake has raised an exceptional gain of RM640mil for the group.
Celcom, a subsidiary, is delivering growth for Telekom that is well ahead of the latter's own fixed line business. Celcom's net subscriber additions, for instance, doubled in the recent second quarter from the first quarter.
There's been a lot of foreign interest in Telekom, the fund manager said. Singapore's Temasek Holdings, for instance, bought half of the 10% stake in Telekom that was placed out by Commerce International Merchant Bankers Bhd earlier this year. Temasek expected Telekom to be able to generate sustained earnings growth, he added.
Although Telekom's share price has hit a medium-term high, it is still below the RM13 level attained in 2000.
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