KUALA LUMPUR: RHB Research anticipates a seasonally weaker quarter for Telekom Malaysia Bhd (TM) for its first quarter (Q1) ended March 31, 2022 which will be announced on May 25.
TM's revenue is likely to go down between six per cent and 10 per cent quarter-on-quarter (QoQ) and between one per cent and six per cent year-on-year (YoY).
"With restrained opex (operational expenditure), core Ebitda (earnings, before interest, taxation, depreciation and amortisation) could slip by a smaller magnitude (versus revenue) while core earnings are likely to be crimped by Cukai Makmur and other one-off items.
"We see scope for further opex savings, with the group well into the second year of its three-year performance improvement programme," said RHB Research in a note today.
It added that the optimisation of office space would see TM shifting most of its operations from Menara TM to TM Annexe and Cyberjaya by end-2022, which could translate into savings of RM100 million in rental and utility costs per annum.
TM remains as the research firm's preferred sector pick as it maintains a "Buy" call on the company with a target price of RM7.65, reflecting a 56 per cent upside with a 3.3 per cent dividend yield.
"Its stronger revenue and earnings outlook remain intact, and we see scope for more opex savings going into financial year 2023 (FY23), while retail fibre competition should be manageable, in our view – buffered, in part, by its expanding wholesale business," it said.
RHB Research noted while TM was seeing stronger retail fibre competition from mobile network operators leveraging on its high speed broadband network, it should still capture the lion's share of subs addition due to the entrenched uniFi branding, migration of remaining Streamyx subs to fibre, and the expanding fibre footprint under the Jendela programme.
Wholesale revenue momentum should stay robust in FY22-23F supported by the progressive recognition of the RM2 billion fibre-leasing contract with Digital Nasional Bhd and contribution from Astro, a fibre access seeker that commissioned its own broadband service in March, it said.
"Enterprise revenue trends could remain patchy, due to competition and challenges in converting pipelines," said the firm.
It added that TM's new digital unit, Credence had been positioned as an independent outfit with a mandate to grow via mergers and acquisitions (M&As).
"We see a gestation period for Credence, as the number of digital/enterprise M&As in recent years by telcos could mean more time required to identify suitable assets.
"That said, we see complementary synergies between Credence and TM One, with the former devoid of legacy execution-type issues," noted RHB Research.