PETALING JAYA: Telekom Malaysia Bhd
(TM), whose core profit of RM436mil in the first quarter ended March 31, 2026 (1Q26) came in within expectations, is keeping its financial year 2026 (FY26) guidance largely unchanged.
The telecommunications group told analysts that its service revenue is expected to grow at a low single-digit rate, while earnings before interest and taxes is projected to remain broadly in line with FY25.
The capital expenditure (capex)-to-total revenue ratio is expected to range between 18% and 20%.
TA Research also said management guided that the group is still in discussions with Digital Nasional Bhd or DNB to resolve the ongoing dispute relating to the early termination of the 5G access agreement.
On the transition to U Mobile’s 5G network, analysts noted that discussions with DNB remain ongoing, while TM continues to exercise its rights under the existing access agreement. Migration to U Mobile’s network is targeted for the second half of 2026 (2H26), with current 1Q26 5G-related costs still linked to DNB.
Meanwhile, BIMB Research said the telecommunications company or telco’s growth prospects remain encouraging, supported by healthy take-up demand for TM Nxera DC ahead of its expected completion in 2H26.
This aligns with management’s strategic ambition to position TM as a regional digital infrastructure player under its C2C segment, leveraging data centres (DCs), connectivity and subsea assets.
The research house said management had reiterated its commitment to the 75% payout policy, although quarterly dividends may fluctuate depending on earnings and provisioning requirements.
TM had declared a first interim dividend per share of 6.5 sen, implying a payout ratio of 78% of reported profit after tax and minority interests.
Both TA Research and BIMB Research kept their “buy” call on the stock with target prices of RM8.80 and RM7.78, respectively.
Moreover, MBSB Research upgraded the stock to a “buy” from “neutral”, raising its target price to RM8.31 (compared to RM7.12 previously), noting steady revenue across all three business segments. This is driven mainly by its convergence proposition and DC-related business.
The research house said the group’s cost-to-revenue ratio remained relatively contained at around 82%.
It noted the group’s careful capital spending, with 1Q26 capex coming in lower at RM212mil, down by close to a quarter year-on-year.
This was mainly due to lower spending on digital infrastructure. The bulk of the capex was channelled for fibre expansion and 5G backhaul under access. In tandem with the historical trend, quarterly capex will increase in the successive quarters, the research house said.
On the eventual switch in the 5G provider, this is anticipated to translate into more manageable 5G costs for the group.
“The recently revised dividend policy to 75% of profit after tax, which is payable quarterly, translates into a more favourable dividend yield of more than 5%,” BIMB Research said. Shares of TM closed at RM7.45 last Friday.
