MIDF stays positive on TM

KUALA LUMPUR: MIDF Research has maintained its "buy" call on Telekom Malaysia Bhd following the acceptance of a 20Hz spectrum block allocation from the 2600MHz spectrum band from the Malaysian Communications and Multimedia Commission.

"We are positive on the news as the increase in capacity will allow TM to provide seamless fixed and wireless access, and content to its retail and enterprise customers at home, office or on the move, align its mission to embark into a dynamic digital space," it said in a report.

MIDF addd that the spectrum will leverage TM's strong and extensive fibre infrastructure to enable future expansion of telecommunication services to customers for an end-to-end converged experience.

In a bourse filing, TM announced that its subsidiary Webe Digital Sdn has accepted the offer and had paid an upfront fee of RM7.1mil.

There will be an additional annual fee of RM6mil to be paid by December 15 each year.

However, the earnings impact from the spectrum assignment acceptance leave will be limited as MIDF expects the annual fee to only impact 1.1% of its earnings estimates.

"We estimate balance sheet of TM to be least affected by this fee as compared to other three telcos namely Celcom Axiata Bhd, Maxis Bhd and Digi.com Bhd which had announced spectrum assignment acceptance yesterday.

"Note that TM has lowest net gearing ratio of 0.53x compared to Celcom Axiata Bhd, Maxis Bhd and Digi.com Bhd net gearing of 0.61x, 1.31x, 7.11x respectively," said MIDF.

The research firm maintained its target price of RM6.91 on the counter, implying an expected total return of 33.4%.