PETALING JAYA: Telekom Malaysia Bhd
(TM) is expected to see stronger earnings growth as its data centre (DC) and submarine cable businesses expand, while improving cost efficiencies and steady broadband revenue provide further support to its outlook.
The group’s growth prospects are increasingly underpinned by its wholesale connectivity business, with rising demand for DC capacity and digital infrastructure expected to strengthen its revenue contribution.
Its consumer broadband operations are also expected to remain resilient, supported by higher average revenue per user (Arpu) and a stable subscriber base.
MBSB Research has upgraded its recommendation on TM to “buy” from “neutral”, raising its target price to RM9.04 a share from RM8.31.
“Among the three revenue segments, we anticipate TM Global to grow at a faster pace.
“This will be supported by the optimism in the DC business, which will also has positive spillover effect for TM One,” MBSB Research said.
“Meanwhile, unifi remains a stable and growing segment which typically account for close to half of the group’s revenue, sustained by the steady subscriber base and Arpu appreciation,” it added.
Further, MBSB Research said TM’s profit margin is expected to expand steadily due to more favourable cost structure, and its dividend yield of close to 5% would add further appeal.
In the first half of financial year 2026 (1H26), TM Global recorded revenue growth of 6.8% year-on-year (y-o-y), ahead of unifi’s 5.2% and TM One’s 1.9%.
Going forward, TM Global’s expansion will be supported by contributions from phase two of the Klang Valley Data Centre and Iskandar Puteri Data Centre, as well as the upcoming TM Nxera artificial intelligence-ready DC.
MBSB Research noted that management was actively exploring organic and inorganic opportunities to expand its DC portfolio amid overwhelming demand.
Its submarine cable business is also expected to contribute to growth, with the Asia Link Cable scheduled to be ready for service in the second quarter of 2027, followed by the Candle submarine cable system in 2028.
TM could also potentially secure the SALAM Submarine Cable System, which would connect Peninsular Malaysia, Sabah and Sarawak.
Meanwhile, unifi accounted for 49.3% of group revenue in the second quarter of 2026, backed by 3.2 million customers, up 1.9% y-o-y. Although subscriber growth is expected to remain modest amid competition, Arpu rose 4.8% y-o-y to RM132 in the quarter.
“This shows that the converge strategies has been effective in improving the yield per customer. Thus, we anticipate the trend to continues, supported by expansion of the content bundling proposition as well as device bundling,” MBSB Research said.
On profitability, the research house expects the cost-to-revenue ratio to move towards 80%, from 84.6% in 1H26, as staff expenses ease following the voluntary separation scheme and 5G costs decline following the migration of unifi Mobile services from Digital Nasional Bhd to U Mobile’s network.
It has raised its FY26 to FY28 earnings estimates by between 1.2% and 2.3%.
