FY11 results
snapshot. All the local telco players have posted fairly strong FY11’s
results that were either within or above the street and our expectations. Going forward,
most of the incumbents are expecting to record a mid
single digit annual revenue growth in FY12 while Digi appears to be more
optimistic by targeting a mid-to-high
single digit revenue growth. EBITDA margin-wise, all the telco players are
expecting to record either a flat or lower margin due mainly to the increase in
operating costs and rising contribution
from the data segment, where the margin is lower as compared to the traditional
voice segment.
2012 industry trends.
Post the FY11’s results, we observe that the industry is heading towards the
following trends: 1) short-to-mid term margin compression as a result of higher
contribution from the data segment; 2) aggressive marketing campaigns and
promotions seemed to have started to be reflected in higher MOU (minutes of
usage) but lower ARPM (average revenue per minute) since 3QCY11 and 3) a rise
in dividend payout.
Industry outlook.
We expect the incumbents to grow by mid-to-high single digit in 2012 with the
data segment continuing to remain in the driver seat. Smartphone penetration
remains low at approximately 20%, which suggests more room to grow for the data
segment. Furthermore, with more attractive data bundle packages, cheaper smartphone devices and rising popularity of tablets,
the growth prospect in the data segment remains bright.
More heat in the home
broadband segment. TM signed a 10-year collaboration agreement with Maxis
in December 2010 to allow the latter’s offering of FTTH via its high-speed
broadband network. Maxis has started the
launch of its FTTH plan since 2HFY11 in selected areas (i.e. Klang Valley,
Penang, and Johor Bahru) and is targeting a full scale launch in 1HFY12. Should
Maxis tie up with Astro to ride with the latter’s IPTV content network, we
believe it will provide a head-tohead competition to TM’s UniFi. In addition,
the ability of Maxis’ FTTH service to
ride with the current UniFi set-up box may shorten Maxis’ gestation period
here.
Foreign shareholding
stands at all-time high. Maxis, Axiata and TM’s foreign shareholdings were
at their all-time highs at 29.6%, 28.0% and 20.5% respectively as at end CY11.
Digi on the other hand saw its foreign shareholdings at just 12.6% (ex.
Telenor) vs 28% in early CY07. Its management is of the view that the lower
foreign shareholding was mainly due to the tight liquidity of the stock despite
the company having completed a share split scheme recently. The high foreign
shareholdings in the industry in general
meanwhile suggest that the local telecommunication industry actually has a
strong defensiveness advantage in the volatile market.
Bumper dividend
payout. All the telco players have declared FY11 dividends that are within
or higher than the committed amount/ratio stated in their respective dividend policies. Going forward,
Axiata will declare its FY12 dividend based on a revised higher dividend payout
ratio of 65% (from a minimum of 30% previously) while Maxis and Digi intend to
maintain their payouts at a minimum 40.0 sen and 17.5 sen dividend
respectively. TM on the other hand is leaving its dividend policy (RM700m or
90% of normalised net profits, whichever is higher) unchanged. Still, we are of
the view that the company could potentially reward its shareholders with more dividends
given its strong retained earnings of more than RM1.8b post its recent proposed
capital repayment. We are expecting Maxis, Axiata, Digi and TM to declare 40.0
sen, 19.0 sen, 17.6 sen and 49.6 sen in dividends respectively for FY12.
Source: Kenanga
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