Foreign exchange gain on the group
KUALA LUMPUR: RHB Investment Research has maintained its buy call on Telekom Malaysia Bhd
with a discounted cash flow-based target price of RM6.80, which represents an upside of 24%.
It said on Tuesday TM remains its preferred telco exposure with the recent selldown being excessive.
In a meeting with senior management, RHB Investment Research said key takeaways were the focus on a more effective bundling of services, expanding key verticals and embracing a digitally driven cost model.
"TM is working to deepen its engagement with customers via the use of big data. The attempt to ‘plug the gap’ in its converged offerings could translate into monetisation challenges in the interim although management is confident of the longer-term benefits."
The research firm said the upselling of fibre plans continues to resonate well with subscribers, which should drive stronger average revenue per user and internet revenue.
To reduce cost, TM is also looking at workforce segmentation and potentially cutting down the number of TMpoint outlets, while cross-selling of services may improve moving forward.
RHB Investment Research reported that of the over one million unifi mobile app downloads, about 50% of the users have activated their lines. The promotional 10GB 4G data offer has since been extended to end-April.
"We sense little appetite, however, for a ramp-up in mobility capex (despite its trailing 4G coverage) as the group is recalibrating its group capex along cluster lines (to better sweat existing assets).
"The lower mobile capex intensity could dilute its branding, as data users are increasingly receptive to paying for a good data experience while its rivals continue to invest significantly on 4G."
RHB Investment Research said share price has prices in downside risks to a large extent, hitting a five-year low on April 4 and underperforming the FBM KLCI by 16%.
"We believe the selldown is excessive given the group’s dominant position and relatively stable fixed line business and decent forward dividend yields of 3.8%-4%.
"Additionally, attractive growth opportunities arising from its extensive infrastructure should help drive fixed-mobile convergence (FMC)."
