PETALING JAYA: A better first quarter financial result is expected for Telekom Malaysia Bhd (TM) as the company continues with its cost-cutting measures.
The proposed Celcom-Digi merger is also not expected to substantively affect TM’s earnings given that Unifi Mobile does not significantly contribute to the group’s revenue at this stage, said AmInvestment Bank Research.
Axiata Group Bhd and Telenor Asa recently proposed a merger of their mobile units - Celcom Axiata Bhd and Digi.com Bhd - after the government decided to build the 5G network itself and not issue any 5G spectrum to any players.
However, the research house said although TM does not provide any subscriber details, it believes the Unifi Mobile was slightly ebit (earnings before interest and tax) positive for financial year (FY) 2020. It continued to fare well in first quarter (Q1) of FY21.
Telekom is slated to announce its financial result on May 27 and AmInvestment Bank Research believes it could be a strong quarter given cost optimization initiatives and lumpy sale of indefeasible rights of use (IRU) of wholesale submarine connectivity.
An indication of that is the wide variation in the past - Q1 accounted for 17-30% of FY18-20 normalised net profit.
The research house met management recently and the guidance is for flat to low single digit FY21 revenue growth.
This will be supported by strong FY17-20 Unifi subscriber compounded annual growth rate of 16% and rapid data demand escalation.
Unifi contributed 42% of FY20 revenue, while wholesale business 20%.
The group is expected to see significant FY21 cost savings given that the overall trend remains on a downward trajectory as FY20 opex decreased by 7% year-on-year in tandem with management’s ongoing cost optimisation drive, said AmInvestment Bank
The research house maintains its “buy’’ call with a fair value of RM7.10 a share.