Telekom Malaysia - Good set of 2Q12 results

Period    2Q12

Actual vs.  Expectations

 The 1H12 core NP of RM406m came in above expectations and accounted for 56.3% and 54.2% of ours and the street’s full-year estimates. 

Dividends   Declared an interim single-tier dividend of 9.8 sen with the ex-date on 12 Sept. For FY12, we expect  TM to declare a total 50.1 sen in dividends (20.1 sen annual dividend + 30.0 sen special dividend).

Key Result Highlights

 YoY, revenue rose by 10% to RM4.8b, driven by higher contribution from all its segments i.e. Voice (+1%), Data (+6%), Internet (+22%) and other telco related services (+24%). Reported EBITDA grew by 7% to RM1.58b although the margin dipped by 1.2pp to 32.5% due mainly to the higher direct and maintenance costs.   

 QoQ, the turnover was up by 2% due to the increase in the Internet (+3%) and other related services (+10%) but this was partially offset by lower revenue from the Data (-2%) and Voice (-0.2%) divisions. Despite the moderate increase in revenue, the core NP jumped 22% due mainly to a forex loss vs. a forex gain in 1Q12. 

 Unifi’s subscribers grew by 22% QoQ to 384k at the end of 2Q12 with a blended ARPU of RM181 (-RM1 QoQ). To date, Unifi’s subscribers have reached more than 420k on the back of 1.23m premises covered in 81 exchange areas. This translates into a take-up rate of 33%. Streamyx subscribership on the other hand, dropped by 1.9% to 1.63m (ARPU was maintained at RM79).    

Outlook   No change in its FY12 headline KPIs target despite recording the good set of results (Rev.

+5.0% YoY and EBITDA margin at 32%).   

Change to Forecasts

 We have raised FY12, FY13 and FY14 core NP by 10.4%,  4.3% and 0.2%, respectively, to RM797m, RM830m and RM851m after lowering 1) the direct cost (from 18.5% to 18.1% as a % of sales) and 2) marketing cost (from 5.5% to 4.3%) and 3) the effective tax rate (from 23% to 22%).

Rating  Maintain OUTPERFORM

Valuation    In tandem with the earnings upgrade, we have raised our TP to RM6.45 (from RM6.36 previously) based on an unchanged targeted FY13 EV/forward EBITDA of 7.6x (+2 SD).    

Risks   A potential slowdown in broadband subscribers and persisting margin pressure.   

Source: Kenanga