- Telekom Malaysia (TM) has been served with a suit
amounting to RM222mil by One Visa Sdn Bhd for providing telecommunication
services to the squatters on the latter's land in Pekan Ulu Temiang, Negri
Sembilan.
- TM was alleged as a trespasser on five pieces of land by
the supply of telecommunication services to the illegal occupiers on the land.
- It is understood that One Visa is seeking RM23mil as
special damages being the total rental value of the land based on current
market value rates calculated from March 22, 2011 and continuing until
cessation of the telco services and the date of removal of TM's infrastructure
from the land.
- Additionally, One Visa sought RM198mil as special damages
due to loss of opportunity and/or loss of profit due to the occupation of
the squatters which prevented it from developing
the land.
- Nonetheless, in our opinion, the second claim, (which
forms the bulk of the suit) does not exactly place TM as a direct cause to One
Visa’s inability to develop its land. Rather, the squatters are the ones
directly responsible for the matter and it is difficult to think how TM can be
implicated without the squatters being implicated as well (but where the
squatters have very little financial ability to pay for claimed damages,
logically).
- At this point, we see the first claim as likely, but the
second claim does not look like a strong case, in our opinion. We understand
that TM is holding a meeting today to discuss the issue. In the meantime, we
think this news may be a slight negative to share price.
- In the worst case scenario that TM provides for the whole
amount of RM222mil, we estimate FY13F earnings (currently RM878mil) to reduce
by 24%. Correspondingly, our DCF value will be cut by 1% to RM6.65, if we
factor in the impact of the lawsuit on cash flow projections. Maintain BUY on
TM at unchanged fair value of RM6.70/share.
Source: AmeSecurities
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