The improvement subscription in 2022 both locally and regionally looks likely to sustain into 2023, said Kenanga Research.
PETALING JAYA: An improved nationwide 4G coverage under the Jendela initiative and the expeditious 5G rollout will lay the foundation for the telecoms industry’s long-term growth.
The sector’s outlook is premised on resilient demand from both consumers and business, locally and regionally, with telecommunications entrenching deeper into everyday life, more so after the Covid-19 pandemic.
The improvement subscription in 2022 both locally and regionally looks likely to sustain into 2023, said Kenanga Research in a report.
Players like Celcom Digi Bhd (CDB) are set to benefit from the return of migrant workers, it added.
It said demand for local mobile and broadband will be supported by wider coverage towards the completion of Phase 1 of the Jendela initiative.
Quoting the industry regulator’s statistics, the research house said almost 97% of the populated areas have access to 4G networks (92% before Phase 1 of Jendela) with average mobile broadband speed increased to 52 Mbps (35 Mbps initially).
It added that the 5G rollout will boost demand further with players like Axiata Group Bhd
and OCK Group Bhd benefitting from the construction and fiberisation of more than 5,500 towers under the next phase of the 5G rollout.
Kenanga Research said the just-concluded fourth quarter 2022 (4Q22) financial results season was a mixed bag for stocks in its telecoms universe.
Axiata, CDB and OCK exceeded analysts expectations while Maxis Bhd and Telekom Malaysia Bhd (TM) underperformed on account of higher-than expected depreciation charges and tax expenses largely incurred in the fourth quarter.
The telcos as a whole saw commendable growth for 2022 with top line posting a 6% year-on-year (y-o-y) uptick and core net profit ending higher 8% y-o-y on account of a strong earnings before interest tax depreciation and amortisation (Ebitda), contributed largely by Axiata and TM.
The reopening of the domestic and regional economies saw continued demand for telecommunications as consumers moved on from the pandemic.
Subscribers’ growth saw improvements y-o-y and quarter-on-quarter (q-o-q), both regionally and domestically.
Blended average revenue per user was mixed as all players (local and regional) saw improvement y-o-y and q-o-q with the exception of Ncell Axiata Nepal (minus 10% y-o-y and minus 5% q-o-q).
Kenanga Research maintained its “overweight’’ stand on the sector with its top picks being Axiata, CDB and TM.
Despite lowering its target price (TP) on most of the telco stocks under its coverage, it finds valuations still compelling.
It lowered its TP for CDB to RM4.64 a share (from RM4.69, after guidance on low single-digit Ebitda growth) and Maxis to RM4.52 (from RM4.59 after it factored in lower leasing charges in FY23).
