TM to sustain FY24 resilient earnings, gets 16 ‘Buy’ calls

TELEKOM Malaysia Bhd (TM) is still an exciting stock out there, with 16 ‘Buy’ calls on the counter that has just ended the year with a surge in its profit.

TM posted a net profit of RM1.871 billion for the financial year ended Dec 31, 2023 (FY23), up 64% from the year before, due to a lower net finance cost and tax impact.

Its full year revenue was up marginally, at 1%, to RM12.26 billion, propelled by the strong performance of Unifi and TM Global.

Unifi’s fixed broadband subscriptions experienced a 3.1% growth, reaching 3.13 million, while TM Global’s revenue grew from heightened demand for domestic and international data services, the company said in a statement.

After the FY23 results, TM has 16 ‘Buy’, four ‘Hold’ and two ‘Sell’ calls on its counter, with a 52-week consensus target price (TP) of RM6.60. The counter was trading at RM6.02 at lunch break today (Feb 26), its highest since February 2021.

In a report today, BIMB Securities Sdn Bhd has maintained its ‘Buy’ call with a higher TP of RM7.06, up from RM7.

“Despite the relatively stable Unifi ARPU (average revenue per user) in the current quarter, we anticipate TM to sustain resilient earnings in FY24, bolstered by the expectation of a low tax provision,” it said.

It noted that TM’s FY23 relatively flat revenue had aligned closely with its anticipated figure of 98.6%.

However, its FY23 net profit was above its expectations and consensus estimates by 121% and 110% respectively.

“This variance from our projection was primarily attributed to lower-than-anticipated taxes in the current quarter. In the fourth quarter of 2023 (4Q23), the group’s revenue increased by +5.1% year-on-year (YoY), while net profit saw a rise of over 100% YoY, driven by the recognition of tax credits resulting from the utilisation of previously unacknowledged tax losses,” it said.

In its report, Kenanga Investment Bank Bhd (Kenanga Research) expected costs to remain escalated in FY24 on the back of spillover in FY23 expenses to upgrade IT software and systems, licensing costs (for spectrum, utilities and software), and periodical asset review that results in asset accelerated depreciation.

TM group CEO Amar Huzaimi Md Deris said on its transformation journey, it was now focused on evolving into a digital powerhouse by 2030, while positioning Malaysia as a digital hub for the region. — TMR / pic source: MEDIA MULIA