CGS-CIMB Research retains Neutral on telcos, Axiata top pick


  • Telcos
  • Wednesday, 18 Dec 2019

“Downside risks: more intense competition and adverse new regulations. Upside risk: M&As. Our preferred pick is Axiata (Hold, TP: RM4.45),” it said.

KUALA LUMPUR: CGS-CIMB Equities Research keeps its Neutral rating on the Malaysian telco sector, given weak mobile and fixed revenue growth prospects.

It said on Wednesday the Malaysian telco sector’s FY20F enterprise value/operating free cashflow (EV/OpFCF) of 15.9 times is at a 14% premium over the Asean telco average, with decent FY18-21F estimated core EPS CAGR of 9%.

“Downside risks: more intense competition and adverse new regulations. Upside risk: M&As. Our preferred pick is Axiata (Hold, TP: RM4.45), ” it said.

In September-December, Celcom launched XP Lite to address the fierce competition in the low-ARPU segment and offered rebates to subs who register online.

Maxis’s new RM99/month Hotlink Flex Plus Fibre offer comes with an aggressive 34% bundling discount and target new subs in the low/mid-range segments.

TM’s unifi Mobile extended the RM59 a month promotion (usual price: RM99/month) for its 99 unlimited plan to all users (previously: civil servants and business users only), valid until Dec 31.

RedOne (MVNO) launched a new RM28 a month plan that offers significant video and social media data quota.

“The prepaid market was quieter in Sep-Dec. Celcom removed 10GB/month of social media and games quota from its Xpax plans, a move in the right direction towards better data monetisation.

“However, the market stayed competitive as U Mobile’s RM30/month GX30 unlimited data (3Mbps speed cap) plan is still in the market and Maxis remarketed its Hotlink Superrr plan (very generous YouTube quota) to a wider audience, ” it said.

TM offered new and existing unifi home and business subscribers three-month fee waivers upon activation, upped its 100/300/800Mbps unifi business plan speeds by eight to 10 times and cut the price of its base 100Mbps unifi business plan by 22% to RM139 a month.

TIME launched no-contract variants of its 100Mbps-1Gbps unlimited home fibre broadband plans.

ASTROMaxis are offering pay TV-broadband bundles with 9%-23% discounts.

“Overall, the market was still active and competitive.

“Mobile industry service revenue slid 4.1% yoy (ex-wholesale: -1.0% yoy) in 3Q19 due to lower wholesale revenue, interconnection rate cut and tight competition.

“Qoq, it was just down 0.1%. Celcom lost 0.5%/2.6% pts qoq revenue/EBITDA market share to Maxis and Digi. In the fixed line business, TM’s revenue rose 3.0% qoq (-3.2% yoy) on a land sale, ” CGS-CIMB Research said.


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