Hong Leong Investment Bank Bhd (HLIB) and Maybank Investment Bank Bhd (Maybank IB) have reiterated ‘buy’ calls on the telecommunications company.
Shares of TM rose this morning, up 4 sen to RM6.80 as at 10.45am, with a volume of 762,000 shares traded.
As at 1.11pm, TM’s share price went up further by 6 sen or 0.89% at RM6.82, giving the group a market capitalisation of RM26.17 billion.
TM had requested for a further extension of the “conditions precedent longstop date” to secure shareholders’ approval for its stake in the state-run 5G network at an upcoming extraordinary general meeting as the SSA was a related-party transaction.
TM said in its Bursa Malaysia filing that its net profit for the second quarter ended June 30, 2024 (Q2 2024), fell 30.3% to RM396.42 million from RM568.74 million a year earlier, while revenue decreased 1.7% to RM2.91 billion from RM2.96 billion.
HLIB noted that TM Global is expanding digital infrastructure, including international connectivity and data centre (DC) services, to meet the demands of global carriers and hyperscalers.
“We reiterate our “buy” call with an unchanged discounted cash flow (DCF)-derived target price (TP) of RM7.91.
“Leveraging its extensive fibre reach, TM is seen as a critical building block for the national 5G dual wholesale network and DC rollouts,” HLIB said in a note today.
Maybank IB said TM is a long-term beneficiary of Malaysia’s data centre boom, driven by its connectivity offerings and robust free cash flow, which provides ample room for increased dividends.
The investment bank maintained its “buy” call with an unchanged DCF-based TP of RM7.50, noting that TM will continue to support 5G network rollouts through wholesale fibre.
Meanwhile, Kenanga Investment Bank Bhd (Kenanga IB) and Public Investment Bank Bhd (PIBB) have maintained “outperform” ratings on TM, with target prices of RM7.53 and RM8.80, respectively.
Kenanga IB highlighted that not having equity ownership in the 5G networks might allow TM to allocate more resources to its core fixed connectivity business.
The investment bank expects significant capital expenditure in the near-to medium-term for submarine cables, given the rise of DCs in Johor and investments by hyperscalers like Google, Amazon and Microsoft in Malaysia.
“Furthermore, TM’s relatively smaller mobile subscriber base offers less economies of scale, compared to its peers, which could impact investments in its own 5G network,” Kenanga IB added.
PIBB reiterated that TM remains its top pick in the telecommunications sector, citing TM’s leading role as the country’s key network infrastructure provider.
PIBB said it also believes TM is well-positioned to benefit from Malaysia’s burgeoning data centre industry.