KUCHING: Telecommunications provider, Telekom Malaysia Bhd (TM) backed by its Unifi package is gaining more subscribers although the company performed below research houses’ consensus estimates to date.
According to AmResearch Sdn Bhd (AmResearch) in its recent research report, TM’s third quarter
financial year 2010 (3QFY10) revenue of RM2.19 billion was largely due to better contribution from non-voice sales; in line with expansion of its Streamyx customer base of net added 55,000 customers versus 56,000 in 2QFY10.
Internet, which included Unifi and Streamyx expanded 2.2 per cent quarter-on-quarter (q-o-q) and 1.5 per cent year-on-year (y-o-y). Non-voice continued to be in the driving seat, having an improved revenue contribution from 54 per cent to 56 per cent currently.
More importantly, operating margins from non-voice revenue was higher than that of voice, which should push earnings in the subsequent quarters.
AmResearch in comparing the results with that of the previous quarter observed that there was an expected reduction in revenue from voice business, by 2.2 per cent, which might have been caused by the classification of bundle packages that were only recognised under the internet business.
The implication of the bundled package was; as more subscribers upgrade to bundle packages, the contribution from voice business would decline in tandem because network calls under bundled packages were virtually free.
Under the same topic, ECM Libra Capital Sdn Bhd (ECM Libra) pointed out that Unifi package would drive subscriber growth of 20 to 30 per cent compounded annual growth rate over the next two years.
In its research report, ECM Libra stated that currently, TM has 21,000 Unifi subscribers, with another 8,000 firm orders.
Positively, 30 per cent of these subscribers were new TM customers, which was quite a high percentage. TM guided as Unifi’s coverage area improved, the take-up rate would also increase accordingly.
The company expected 2011 would be a ramp-up year for Unifi, while 2012 would see significant revenue contribution from Unifi.
ECM Libra added that TM was now stuck to its dividend policy of paying RM700 million or 90 per cent of net profits, whichever was higher. During the quarter, TM received RM252.1 million of proceeds and booked RM141.7 million of gain from the disposal of its 60 million shares in Measat. This had helped to boost its cash pile to RM3.8 billion from RM3.6 billion in 2QFY10.
While TM’s net gearing had fallen to 0.34 times, from 0.4 times in 2QFY10. The company still has Axiata shares which it had yet to monetise.
In conclusion, AmResearch pegged TM at a target price of RM3.90 per share meanwhile ECM Libra pegged it at RM3.54 per share.