PETALING JAYA: Telekom Malaysia Bhd
(TM) is a beneficiary of Malaysia’s data-centre boom through connectivity offerings in the longer term.
Its strong free cash-flow generation leaves ample headroom for increased dividends, according to Maybank Investment Bank (IB) Research.
Kenanga Research added that there are tremendous opportunities in providing connectivity services for data centres in Johor, including regional DC-to-DC connectivity for hyperscalers.
Its partnership with an incumbent in Singapore will enhance its ability to deliver these services.
Despite anticipated competition from TIME Dotcom Bhd and international incumbents (for example Starhub), TM remained confident of its growth prospects in this space, said Kenanga Research.
It liked TM on account of it being leveraged towards secular data growth on the back of current trends, such as digital transformation, proliferation of Internet of things and cloud services powered by generative artificial intelligence.
It also benefits from the upcoming Jendela phase two projects via rollout and monetisation opportunities, as well as earnings accretion from development of new hyperscale data centres.
There is also higher demand for data transmission via its network of digital infrastructure that includes submarine cables and landings, as well as fibre optics backhaul.
TA Research added that it intends to allocate more capital expenditure to developing new submarine cable systems and expanding data centres.
Hong Leong Investment Bank (HLIB) Research is particularly positive on its cost optimisation measures, which is yielding an impactful outcome.
Leveraging on its extensive fibre reach, TM is perceived to be the critical fundamental building block of national 5G dual wholesale network and DC deployments.
It added that TM could still offer 5G to its customers despite the termination of the share subscription agreement with Digital National Bhd (DNB) as it has a 5G access agreement with DNB valid for 10 years.Maybank, HLIB, TA Research and AmInvestment Research maintained their “buy’’ calls on the stock, while Kenanga Research has an “outperform,” and UOB Kay Hian Research has a “hold” call.
