PETALING JAYA: There is potential upside risk to Telekom Malaysia Bhd
’s (TM) dividends amid ongoing cost optimisation and capital expenditure (capex) discipline.
Based on Maybank Investment Bank Research’s (Maybank IB) revised earnings forecasts, it estimated that TM could generate RM1.7bil to RM1.8bil of enterprise free cash flow annually.
The 60% dividend payout ratio (the top-end of TM’s current dividend policy of 40% to 60% payout ratio) would require about RM1bil to RM1.1bil by its estimates.
If the current dividend policy is maintained, it sees TM turning net cash by financial year 2028 (FY28).
There is ample buffer in Maybank IB’s view for TM to raise dividends.
The research house also maintained a 60% dividend payout for now, which implies about a 4% yield.
Maybank IB revised its FY25, FY26 and FY27 earnings forecasts by 0%, 0% and 3%, respectively, after lowering its capex assumptions.
The research house has retained its “buy” call on the stock with a higher target price of RM8.50 from RM7.50 previously.
It also sees TM sustaining its cost and capex optimisation efforts in the coming years.
TM had provided for another round of voluntary separation scheme for employees in the third quarter of 2025.
This should lower staff costs from FY26 onwards.
Apart from FY22 (the peak of the Jendela-led fibre rollout), TM has maintained its capex-to-sales at below 18% since 2018.
With fibre premises passed already elevated (about 9.5 million premises), it expects TM to maintain its capex discipline.
It now assumes stable capex in FY25 to FY27.
This implies a 15% to 16% capex-to-sales, from rising capex previously.
It believes that in the longer term, TM is conceptually a beneficiary of Malaysia’s data centre boom through its connectivity and data centre offerings.
In its third quarter ended Sept 30, 2025 (3Q25), TM’s net profit jumped 47.6% to RM686.3mil, or 17.88 sen per share, bringing its nine-month profit 15.9% higher to RM1.49bil, or 38.84 sen per share.
In a filing on its latest financial results, announced last month, TM said the higher profit reflected the group’s execution discipline, coupled with one-off items recognised during the quarter.
Quarterly revenue rose 2.6% to RM2.99bil, lifting nine-month revenue to RM8.61bil.
No dividend was declared for the current quarter ended Sept 30.
TM said capex came in at 14.9% of revenue, in line with its full-year guidance, reflecting disciplined execution of its strategic investments.
It added that the expansion of its data centres in the Klang Valley and Iskandar Puteri had moved into the operational phase, with an additional 20MW of capacity now available, strengthening Malaysia’s position as a regional hub for hyperscalers and cloud service providers.
TM said improved asset utilisation and stronger earnings, combined with disciplined investments, have lifted its return on invested capital to a record 13.5%, contributing positively to stakeholder value.
The group added that it maintains a positive outlook for the remainder of 2025.
