PETALING JAYA: There is an attractive risk-reward profile for fixed-line telecommunications company or telco operators.
This is given their key role in broadband/5G infrastructure and imminent data centre deployments as the build-out phase progressively gets completed.
Both Telekom Malaysia Bhd
(TM) and TIME Dotcom Bhd are looking to optimise their under-leveraged balance sheets in 2026, which include upward revisions to dividend policies and special dividend payouts, said Hong Leong Investment Bank (HLIB) Research.
HLIB Research has maintained its “overweight” outlook on the sector.
Its top pick for the sector is TM, for which it has a “buy” call, with a target price of RM8.60 a share.
It highlights Axiata Group Bhd – “buy” recommendation with a target price of RM2.95 a share – as an event-driven opportunity, where potential asset-monetisation catalysts should help narrow the discount to the intrinsic value of its underlying assets.
Lastly, Digital Nasional Bhd (DNB) remains the key debate for mobile, while HLIB Research believes execution risk is increasing in the price for both Maxis Bhd and CelcomDigi Bhd.
A sustained re-rating will likely require greater clarity regarding DNB’s long-term direction, it added.
Time dotCom has revised its dividend policy upwards to a 50% to 75% payout range, from 50% previously.
The firm has layered in management’s target to optimise leverage toward one to 1.5 times net debt over earnings before interest, taxes, depreciation and amortisation over a two-to-three-year horizon.
HLIB Research estimates Time dotCom has the capacity to distribute a 30-sen special dividend per share in both financial year 2026 (FY26) and FY27, on top of an assumed 75% normal payout.
For TM, the FY25 dividend payout was around 70%, above its stated 40% to 60% policy range.
The fourth-quarter 2025 financial results wrapped up FY25 on a steady note, broadly in line across the sector, HLIB Research said.
The mobile players navigated 2025 better than feared with prepaid average revenue per user trending higher, competition remaining rational and 5G wholesale cost headwinds being more contained than anticipated.
Given these positive dynamics, HLIB Research believes the mobile market is on track for low single-digit revenue growth in 2026, consistent with guidance from both CelcomDigi and Maxis.
It added that DNB would likely remain the focal point of investor concern in the near term.
