TM (4863) - Telekom Malaysia - Stronger revenue performance
Target RM6.30 (Stock Rating: REDUCE)
4Q14 core net profit rose 83% qoq (+21% yoy). At 112%/110% of our/consensus forecast, FY14 core net profit came in ahead due to lower-than-expected interest costs and taxes. FY14 EBITDA was largely in line at 103% of our estimate. Final DPS of 13.4 sen was higher than our forecast of 11.6 sen and brought full-year DPS to 22.9 sen (payout: 89%). We raise our FY15/16 core net profit forecast by 6.0%/2.0% and DCF-based target price by 5% to RM6.30 (WACC: 8.0%). Despite the good results, we keep our Reduce rating as we expect earnings dilution from P1 to build up significantly over the next three years. Its FY15-17 dividend yields of 3.4-3.6% are also unattractive vs. its telco peers. We prefer Telkom Indonesia, Singtel and Thaicom in ASEAN.
Strong rebound in Internet revenues
Internet revenues rebounded strongly by 16.0% qoq (+16.8% yoy) after 3Q14 was negatively impacted by the cleanup of delinquent Streamyx accounts. This was largely driven by 5.9%/3.8% qoq increase in Streamyx/UniFi ARPU from upselling activities and HyppTV content. UniFi net addition picked up slightly qoq to 29k (3Q14: 27k, 4Q13: 28k) due to more aggressive selling activities. The pace of UniFi net addition could remain high in 1Q15 as the number of subscribers is currently at 750k (end-4Q14: 729k). We expect broadband subscriber growth to pick up in 2015/16 to 5.2%/5.3% yoy (2014: +0.7%) once HSBB-2 is rolled out.
Other revenues streams also bounced back qoq
Voice revenues rose 9.5% qoq (-2.4% yoy), driven by higher sales at its global/wholesale business. Data revenues jumped 31.6% qoq (+12.2% yoy), partly driven by a spike in submarine cable capacity sales. Other revenues were up 27.9% qoq (-0.4% yoy) as customer projects resumed following their deferment in 3Q14.
Higher EBITDA margin in 4Q14
Normalised EBITDA margin gained 0.7% pt qoq (+1.7% pts yoy) to 33.9% in 4Q14. This was largely due to the higher revenues as well as lower manpower costs, partly offset by a spike in bad debts due to a tighter credit treatment policy. Overall, we forecast EBITDA margin to decline to 32.8%/32.4%/31.2% in FY15/16/17 after factoring in the dilution from P1.
Source: CIMB Daybreak - 27 February 2015
Target RM6.30 (Stock Rating: REDUCE)
4Q14 core net profit rose 83% qoq (+21% yoy). At 112%/110% of our/consensus forecast, FY14 core net profit came in ahead due to lower-than-expected interest costs and taxes. FY14 EBITDA was largely in line at 103% of our estimate. Final DPS of 13.4 sen was higher than our forecast of 11.6 sen and brought full-year DPS to 22.9 sen (payout: 89%). We raise our FY15/16 core net profit forecast by 6.0%/2.0% and DCF-based target price by 5% to RM6.30 (WACC: 8.0%). Despite the good results, we keep our Reduce rating as we expect earnings dilution from P1 to build up significantly over the next three years. Its FY15-17 dividend yields of 3.4-3.6% are also unattractive vs. its telco peers. We prefer Telkom Indonesia, Singtel and Thaicom in ASEAN.
Strong rebound in Internet revenues
Internet revenues rebounded strongly by 16.0% qoq (+16.8% yoy) after 3Q14 was negatively impacted by the cleanup of delinquent Streamyx accounts. This was largely driven by 5.9%/3.8% qoq increase in Streamyx/UniFi ARPU from upselling activities and HyppTV content. UniFi net addition picked up slightly qoq to 29k (3Q14: 27k, 4Q13: 28k) due to more aggressive selling activities. The pace of UniFi net addition could remain high in 1Q15 as the number of subscribers is currently at 750k (end-4Q14: 729k). We expect broadband subscriber growth to pick up in 2015/16 to 5.2%/5.3% yoy (2014: +0.7%) once HSBB-2 is rolled out.
Other revenues streams also bounced back qoq
Voice revenues rose 9.5% qoq (-2.4% yoy), driven by higher sales at its global/wholesale business. Data revenues jumped 31.6% qoq (+12.2% yoy), partly driven by a spike in submarine cable capacity sales. Other revenues were up 27.9% qoq (-0.4% yoy) as customer projects resumed following their deferment in 3Q14.
Higher EBITDA margin in 4Q14
Normalised EBITDA margin gained 0.7% pt qoq (+1.7% pts yoy) to 33.9% in 4Q14. This was largely due to the higher revenues as well as lower manpower costs, partly offset by a spike in bad debts due to a tighter credit treatment policy. Overall, we forecast EBITDA margin to decline to 32.8%/32.4%/31.2% in FY15/16/17 after factoring in the dilution from P1.
Source: CIMB Daybreak - 27 February 2015
