- We maintain our HOLD call on TM, with a lower fair value
of RM5.40/share (vs. RM5.60/share previously) following the release of its 4Q12
results yesterday.
- Core net earnings were better than expected (but below consensus
estimates). Revenue and EBITDA were largely inline, accounting for 103% and
99%, respectively, versus our FY12 estimates.
- Unifi subscribers stood at 482,513 as at end-2012 and 515K
to date. Net adds improved to 55K in 4Q12 (3Q12: 43K). Extrapolating net adds
up to end-February 2013, it looks like 1Q13 net adds are a tad slower at
48K-49K. The launch of Maxis’ Astro IPTV bundling at end-1Q13 could pose a
threat, particularly with ballooning Unifi contract expiry. On the bright side,
Unifi ARPU seems to have picked up traction with a higher take-up of HyppTV
channels. Unifi ARPU stood at RM182 at end-2012 vs. RM180-RM181 in 1H12 and
9M12.
- TM is looking at various ways to further monetise its
network. While LTE is a threat to a certain extent, the high frequency it operates
on means poor signals in buildings, creating opportunities for offloading services
via TM’s fixed network. Nonetheless, any proliferation of LTE services is
likely to be gradual based on indications by the celcos.
- Management seems to be expecting margin pressure this year
– EBIT growth rate of just 3% vs. revenue growth of 5% in its FY13 KPI. We
suspect this could be due to an increased focus on ICT-BPO business lines which
fetch lower margins, as it involves TM incurring CPE and router cost for
customers. Other than that, 2 other key areas of cost pressures are in:- (1) man-power,
given the new retirement age of 60; (2) maintenance cost, given the progressive
expiry of maintenance contracts/warranties related to network equipment.
- Capex intensity is expected to be reduced going forward,
i.e. from 26% (FY12) to 24% in FY13F, and this is expected to be gradually
lowered to 20% and below from FY15F onwards.
- We have adjusted our earnings lower by 2%-4% over FY12F-14F
to reflect lower margin expectations, closer to management’s guidance. We also
raise our capex assumptions over FY13-15F as this is expected to remain elevated
in the near term despite the transition to a demanddriven HSBB rollout
(notwithstanding falling capex intensity ratios) given access capex
requirements and absence of government grants post-PPP arrangement which ended
in 2012.
- TM announced a final dividend of 12.2 sen/share, which brought
full-year dividends to 22 sen/share (+12% YoY), representing a payout of 62%
against reported FY12 earnings (FY11: 59%).
Source: AmeSecurities
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