PETALING JAYA: Telekom Malaysia Bhd
’s (TM) earnings outlook is improving as its data centre operations gain traction and several cost pressures are expected to ease in the second half of 2026 (2H26), giving the telecommunications group room to build on stronger revenue momentum seen in the first six months.
CGS International (CGSI) Research said the company’s improving revenue growth and slower manpower costs could provide an additional boost to second-half earnings, while Kenanga Research highlighted the strong demand for TM’s data centre capacity as a key catalyst.
“TM’s core net profit (CNP) for the second quarter (2Q26) of RM365mil brought 1H26 CNP to 40% of our estimates for the financial year ending 2026 (FY26) – an in-line result given 2H26F upside,” the research house said.
One of the main earnings catalysts is the TM-Nxera data centre in Johor, a joint venture with Singtel’s Nxera.
Kenanga Research said Phase 1, which has 64MW of capacity, was progressing ahead of schedule, with 20MW expected to be ready for service implementation by September and 70% of the total capacity already contracted.
“Given the robust demand, the group is in discussions to potentially accelerate the launch of Phase 2, which would add an additional 136MW of capacity,” it observed.
The development could strengthen TM’s position in Malaysia’s growing hyperscale data centre ecosystem, while also generating demand for its related connectivity services. Kenanga Research expects the first phase to be launched in 4Q26.
Meanwhile, TM’s Unifi business continues to provide a relatively stable earnings base, although growth in its consumer subscriber numbers has slowed.
Kenanga said second-quarter net additions moderated to 3,000 from 10,000 in the previous quarter as competition intensified, particularly from mobile operators targeting converged customers.
Average revenue per user nevertheless held at RM132, supported by greater adoption of device bundles and combined broadband, mobile, content and smart-home offerings.
Shareholders, meanwhile, continue to receive support from the group’s dividend policy, with TM declaring a second interim dividend of seven sen a share in 2Q26, bringing first-half dividends to 13.5 sen.
CGSI Research expects the payout ratio to rise to 80% for FY26, citing TM’s relatively low leverage.
An analyst was also constructive on the counter, as a steady earnings-recovery and dividend case.
The near-term picture is supported by improving revenue momentum, better cost discipline and potentially lower 5G access costs, while the more compelling medium-term catalyst is TM-Nxera, the analyst told StarBiz.
“Unifi remains defensively positioned, but slowing subscriber additions and intensifying competition mean we would not expect consumer broadband to be the main source of upside.
“More importantly, TM’s relatively strong balance sheet provides room for attractive dividends,” she said.
CGSI Research retained its “add” call with a RM9.50 target price, while Kenanga Research maintained “outperform” and raised its target to RM9.11 from RM8.86.
