TM could gain up to RM815m from Bangsar towers sale

The proceeds are expected to strengthen TM’s cash position amid rising cost pressure and competition

By MARK RAO / Pic By TMR

Telekom Malaysia Bhd (TM) could generate as much as RM815 million from the proposed sale of its office annexes, located next to the telecommunication company’s (telco) iconic headquarters in Bangsar.

The proceeds are expected to strengthen TM’s cash position amid rising cost pressure and competition, analysts said.

TM announced last week a tender to dispose of two office towers, namely Menara TM Annex 1 and Menara TM Annex 2, which have a combined gross floor area of 679,015 sq ft.

Property agent at Zerin Properties, Danny Gan, said a rule of thumb to estimate the average selling price of a commercial property is to base it off its rental income.

Menara TM Annex 1 is a 20-storey office tower with 266,140 sq ft in gross floor area and 188,122 sq ft in net lettable area, while Annex 2 is a 33-storey office tower with gross floor and net lettable areas of 412,875 sq ft and 280,650 sq ft respectively.

“For example, if a commercial property is being rented out at RM4 per sq ft, this would roughly translate into an average selling price of RM800 per sq ft,” he told The Malaysian Reserve (TMR).

The TM towers, which are being rented at RM6 per sq ft, would account for a selling consideration of RM1,200 per sq ft or RM814.82 million for the total 679,015 sq ft in gross floor area.

However, it’s worth to note that due to current weak property market conditions in Kuala Lumpur, commercial space is usually sold under market value.

TM has fixed Feb 27 for the tender briefing for the sale of the office towers.

AmInvestment Bank Bhd senior VP for equity research Alex Goh said the sale of the towers is perceived as a means for TM to unlock value from its assets and generate cash to offset the lowering broadband prices and higher competition faced by the telco this year.

“With the reduction in unifi rates, the company’s profits are coming down and the sale of the towers can help strengthen its balance sheet and cash position,” he told TMR.

“TM will have to continue to roll out unifi services to rural areas and (selling of the annexes) will reduce the resultant cost pressure.”

TMR reported earlier this month that TM will continue to face sustained earnings pressure in the near future on challenging operating conditions within the telco sector.

Malaysia succeeded in cutting broadband prices by 25% in 2018 via the implementation of the Mandatory Standard on Access Pricing (MSAP) on June 8 last year. TM, as the largest telco in the country, came under pressure and was forced to lower its unifi rates.

The MSAP is a price ceiling, enforced by the government, which dictates how much wholesale network providers can charge other telcos seeking access to high-speed broadband (HSBB).

TM charges other players for access to its HSBB network and the MSAP has resulted in lower access pricing which took a toll on TM’s earnings.

TM posted its first quarterly net loss in 10 years when it slipped to a loss of RM175.59 million in the third quarter ended Sept 30 last year (3Q18) against a net profit of RM211.82 million in 3Q17.

This was largely down to impairments on wireless and fixed-network assets recognised for the quarter.

The telco’s cashflows from operating activities also declined 11.5% year-on-year to RM1.01 billion in 3Q18, while raking up RM8.89 billion in total bank borrowings.