PETALING JAYA: Shareholders of Telekom Malaysia Bhd
(TM) will have better return on equity (ROE) visibility after the company last Friday announced a revised dividend payout ratio (DPR) of a minimum of 75% of profit after tax and minority interest (Patami) payable on a quarterly basis.
Analysts have in turn also lifted their dividend payout assumptions for the financial year ending Dec 31, 2026 (FY26) to FY28 upwards. The DPR policy starts from the first quarter ended March 31, 2026 (1Q26). The previous DPR policy ranged from 40% to 60% and was on a semi-annual basis.
RHB Research views the revision in the DPR as timely and positive given the company’s strong balance sheet with net debt/earnings before interest, tax, depreciation and amortisation at a record low of 0.4 times in 4Q25 and net gearing at 0.2 times.
“The minimum payout offers dividend certainty to investors, aligning TM with its peers or mobile network operators (typically 80% of underlying Patami) which declare quarterly dividends,” it said, noting that dividend payments would come from internally generated funds.
Other operators with comparable DPR policies include TIME Dotcom Bhd with a DPR of 50% to 75% of core earnings announced in 4Q25 while Singapore Telecommunications Ltd has a 70% to 90% DPR of core earnings in addition to a variable realisation dividend of three to six cents per share.
RHB Research has maintained a “buy” call on the stock with an unchanged target price (TP) of RM9.30 on a forward dividend yield of 5%. “We view the revision in TM’s DPR positively, offering yield-seekers dividend certainty with potential for special dividends.”
BIMB Research has upgraded the stock to a “buy” call from “hold”, with an unchanged TP of RM7.78. It noted that the recent share price weakness driven by concerns over higher costs arising from the ongoing tussle with Digital Nasional Bhd on the 5G wholesale arrangement termination appears overdone.
“We believe the revised dividend policy serves as a strong counterbalance, reinforcing management’s confidence in cash flow generation while enhancing shareholder returns. The shift to quarterly payouts should also enhance investor appeal, particularly among income-focused funds, given the improved consistency and visibility of returns.”
Growth would be driven by expansion in data centres, edge computing, 5G backhaul, and international subsea connectivity.
For FY25, the company’s wholesale business revenue expanded by 7.6% to RM3.3bil and contributed 30% to revenue.
This was underpinned by rising demand for fibre backhaul and network services.
“This momentum is expected to persist, providing key support to management’s guidance of low single-digit revenue growth in FY26,” BIMB Research said.
Analysts also noted that the move to have a higher DPR policy could be to support government finances, as the added spending on higher fuel costs may push government-linked companies (GLCs) such as TM to pay out more.
CGS International Research pointed to TM as an ideal GLC for this push given the company’s excess cash and underleveraged balance sheet in respect of net debt to Ebitda as at end FY25.
It has reiterated an “add” call with a revised TP of RM9.50 from RM8.80 on the back of higher ROE estimates.
“In addition to this announcement of a higher DPR and frequency, we see TM’s improved earnings trajectory on its recent cost rationalisation plans providing a re-rating catalyst of its shares, which trade at an undemanding 11.9 times FY27 price-to-earnings (PE),” it said.
“We note that prior to 2018, when TM’s dividend payout ratios were more than 90%, its shares traded at greater than 20 times 12-month forward PEs. Based on our revised estimates, TM’s FY27 dividend yield would be an attractive 6.7% (versus 4.7% in FY26), assuming an 80% payout,” it said.
