- We maintain our HOLD rating on TM with an unchanged fair
value of RM5.60/share following the release of its 3Q12 results.
- 3Q12 core net profit was registered at RM186mil, bringing 9M12
earnings to RM593mil. This is within expectations, accounting for 78% and 73%
of our and consensus estimates, respectively.
- Earnings fell 17% QoQ on the back of a 2% decline in revenue.
Voice revenue fell by 4% QoQ due to lower usage and lower physical connections,
while a one-off government project inflated 2Q12 revenues, leading to the 3Q12
sequential decline.
- EBITDA margin contracted (-0.6ppts QoQ to 32.1%). Supplies
and material costs (comprising customer acquisition cost such as CPE and
set-top boxes) rose 33% QoQ. While Unifi net add was lower than prior quarters
due to churn, gross adds apparently were still significant.
- Unifi net addition dropped to 48K from 63K in 2Q12. Management
notes that August was a short working month and there were “forced” churn as TM
takes out subscribers exceeding their credit limits off its network (amounting to
7,540 subs). However, we are cautious on churn rate going forward as a growing
number of initial Streamyx subs reach contract expiry.
- Total Unifi subs base stood at 427K at end-3Q12 and 462K currently,
implying slightly improved net adds in the first two months of 4Q12
(17.5K/month vs. 14.3k/month in 3Q12). However, this is much lower than the
22K/month and 18.5K/month net add seen in 1Q12-2Q12.
- TM acknowledges competition from Maxis, and in particular,
Astro IPTV packaging, which will start in 2013. While TM gains wholesale
revenue from fibre access leased to Maxis, we believe this would be at lower
margin vs. Unifi. Management is focusing effort on beefing up HyppTV content,
but we believe it would take time for HyppTV to achieve similar brand awareness
as Astro.About 15% of Unifi subs take up paid channels while 40% actually use
the IPTV service.
- From a valuation standpoint, TM looks expensive relative to
historical levels – trading at 1-standard deviation above the historical
average EV/EBITDA and well above historical average PE. The share price has
outperformed the index by close to 30% over the past 12 months. Given peaking Unifi
growth rate (which has been its key earnings catalyst), we believe valuations
are likely to revert to historical averages, notwithstanding potential dividend
upside from FY14F.
Source: AmeSecurities
No comments:
Post a Comment