Quick take: TM falls on news the company is being sued

KUALA LUMPUR: The share price of Telekom Malaysia Bhd (TM) fell nearly 2% in early trade Friday, after Malaysian Football League LLP (MFL) sued TM over breach of contract.

The telco giant, one of the top losers, fell some 1.86%, or six sen to RM3.16.

TM said Malaysian Football League LLP (MFL) has filed a legal suit against the group, seeking reliefs of over RM400mil and a declaration that TM had breached a sponsorship contract between both parties.

TM has instructed its solicitors to take necessary steps to defend the claim.

MFL is seeking an order requiring TM to pay RM51.7mil for sponsorship and broadcast consideration this year, and another RM376.6mil for the years 2020 to 2025.

MFL is also seeking an order compelling TM to remove, take down and delete all references of TM as a sponsor or official telecommunication and broadcast partner of MFL in all TM’s materials published or issued by TM or TM’s directors, partners, officers, employees, representatives or agents within 48 hours from the date of this Judgment.

PublicInvest Research said the RM480mil legal claim BY MFL on TM for termination  of its sponsorship seems a little far-fetched.

“In our opinion, the total sum seems a little far-fetched as we reckon TM would have assessed the risks and taken into consideration the necessary terms and conditions before terminating the contract,” it said.

At this juncture, PublicInvest maintained its core earnings forecasts, though it see downside risk to headline profit should TM fail 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.