Tuesday, 16 December 2014

Maybank KE Research maintains Hold on TM

KUALA LUMPUR: Maybank KE Research has maintained its Hold on Telekom Malaysia (TM) with a raised target price of RM7.20 on higher long-term growth assumption to reflect an improvement in TM’s longer-term prospects.

In a note on Tuesday, the research house said its FY14/15/16 net profit forecasts are consequently reduced by 2%/8%/11% respectively.

While the acquisition of a 57% stake in loss-making P1 was completed in Sep 2014, TM intends to only reveal its wireless strategy in 1Q15, it said.

"For now, we expect P1 to roll out its LTE network in 2015-17, with monetisation beginning in 2016. 

"We expect P1 to command 7% mobile data revenue share in 2017. By our estimates, P1 would only achieve break even (at the pre-tax level) closer to 2020," it said.

Maybank believed that a large part of TM’s 2014 share price rally was down to its impending entry into the wireless space (via the acquisition of a 57% stake in P1).

While the concept of convergence (between wireless and fixed) represents an attractive long-term proposition, there are near-term pains, which include the absorption of P1’s losses and additional capex for the LTE network rollout.

"This drag to TM’s P&L and cashflows would begin to manifest in 2015," it said.
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