TM’s shares surge on RM261m net profit in 3Q

The telco has monitored its operational efficiencies to deliver sustained profitability with lower YTD revenue


TELEKOM Malaysia Bhd’s (TM) share price hit a three-month high after the telecommunications (telco) giant reversed its fortunes, delivering a net profit of RM261.31 million in the third quarter ended Sept 30, 2019 (3Q19).

The country’s largest fixed-line telecommunications operator posted a net loss of RM175.59 million a year ago.

TM’s shares rose to a high of RM3.99 before ending yesterday’s trading 16 sen higher at RM3.88, valuing the group at RM14.61 billion. The FTSE Bursa Malaysia KLCI declined 0.47%.

For the year ended Dec 31, 2018, the stock plunged 57.8%, erasing RM13.72 billion from the group’s market capitalisation.

In 3Q18, the telco slipped into its first quarterly loss in 10 years due to huge impairments on its wireless and fixed network assets. TM returned to the black in 4Q18. Earnings per share stood at 6.95 sen in 3Q19, compared to loss per share of 4.67 sen in 3Q18.

Revenue decreased 3.4% YoY to RM2.85 billion in 3Q19 from RM2.95 billion last year, attributed to declines in voice, Internet and multimedia services, as well as other telco-related services.

The group saw continued improvements in its fundamentals during in 3Q19, its group CEO Datuk Noor Kamarul Anuar Nuruddin (picture) said.

“I’m pleased to report that our cost management initiatives under our performance improvement plan carried out since last year continue to yield results with profitability improvement. We have managed to keep a closer eye on our operational efficiencies to deliver sustained profitability with lower year-to-date (YTD) operating expenditure/revenue.

“However, in line with sector contraction, our revenue challenges still persist on the retail front, in line with our expectations and 2019 market guidance,” he said in a statement yesterday.

Noor Kamarul added that TM’s capital expenditure (capex) for the nine months ended Sept 30, 2019 (9M19), is well within guidance at 8.8% of revenue and is on track as the group continues its targeted investments to deliver better service experiences.

Revenue from unifi fell 10.9% to RM1.19 billion in 3Q19 from RM1.33 billion previously, while earnings before interest and taxes (Ebit) came in at RM79.8 million versus a loss of RM784.9 million in the same quarter last year.

For the TM One segment, revenue slipped 4.3% to RM1.07 billion in the three months from RM1.12 billion a year ago, while Ebit declined 7.7% to RM282.4 million against RM305.8 million in 3Q18.

Meanwhile, revenue from TM Global increased by 6.5% to RM585 million in 3Q19 from RM549.3 million the year before. The business segment also recorded an Ebit of RM79.9 million in 3Q19, against a loss of RM20.8 million from July to September 2018.

TM’s earnings have been under pressure as challenging operating conditions persist within the telco sector, following the government’s push for faster broadband speeds at lower prices.

Industry players have slashed prices, revised data quotas and offered new packages to entice customers looking to jump ship, making the fixed-broadband landscape — once dominated by TM — now arguably a more open playing field.

AmInvestment Bank Bhd maintained its ‘Hold’ recommendation on TM, with an unchanged fair value of RM3.50 per share.

“We remain cautious on TM’s prospects from the potential impact of the National Fiberisation and Connectivity Plan which could further halve entry price packages next year, while significantly raising the capex levels of fibre infrastructure owners,” it wrote in a note yesterday.