Brokerages maintain ‘sell’ calls on TM

The Turbo Upgrade will bump 20Mbps or lower subscribers to 100Mbps, 30Mbps to 300Mbps, 50Mbps to 500Mbps, and 100Mbps to 800Mbps.

PETALING JAYA: Several research houses have maintained their “sell” calls on Telekom Malaysia Bhd (TM) as they expected the firm to continue facing stiff competition in the broadband space.

MIDF Research said the availability of Unifi 30Mbps basic plan to all segments of the market could lead to TM’s Unifi customers downgrading their respective broadband packages, which would in turn put pressure to its average revenue per user (Arpu).

“We foresee these pressures to persist in the immediate term. Our main concern lies with Unifi and TM ONE, the group’s main revenue contributors,” it said in a report.

The Unifi 30MBps basic plan is available at RM79 per month. Additionally, MIDF expected a decline in TM’s dividend payment as the telecommunications firm continued to face earnings pressure, coupled with its capital expenditure commitment.

“We are concerned about the group’s ability to manage its operating expenses efficiently. The cost as a percentage of revenue has increase steadily to around 90%,” it said.

Shares in TM closed six sen lower to RM2.96 yesterday. It shares have fallen almost 50% in the past one year.

UOB Kay Hian Malaysia Research has maintained its “sell” call on TM with target price of RM2.25.

In the fourth quarter ended Dec 31, 2018, Unifi revenue fell 6% year-on-year (y-o-y) on the back of migrating Streamyx copper customers to Unifi entry packages; and dilution from new packages.

“In the third quarter of 2018, we highlighted risk of Arpu dilution due to package downgrades. Stepping forward, management guides that customer churn and downgrade trends have stabilised.

“The company added 82,000 Unifi subscribers in the quarter but Arpu fell 7% y-o-y to RM184 per month as a result of new packages launched in the third quarter,” UOB Kay Hian said in a report.

“TM earnings prospects have stabilised for now with around 90% of Streamyx and Unifi existing customers having been upgraded to faster speed packages while experiencing minimal downtrading activities together with manageable revenue declines in FY18,” it said.

For the fourth quarter ended Dec 31, 2018, TM posted a 75% plunge in net profit to RM69.66mil from RM277.01mil a year ago due to higher finance costs and lower foreign-exchange gains on the group’s borrowings, as well as tax charges.

Revenue for the quarter fell 3.5% to RM3.09bil compared with RM3.2bil a year ago. Earnings per share fell to 1.86 sen, from 7.37 sen previously.

TM has declared an interim dividend of two sen per share that will be distributed on April 12. Cumulatively, for FY18, TM posted an 83.5% decline in net profit to RM153.15mil from RM929.75mil in FY17.

TM said the plunge in net profit was due to a provision of RM982.5mil for the impairment of fixed and wireless network assets due to the continued pressure from challenging business, industry and economic conditions.

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