Maybank Investment Bank Bhd (Maybank IB) reiterates “BUY” for Telekom Malaysia Bhd (TM) with an unchanged RM6.50 discounted cash flow (DCF)-based Target Price (TP).
The telco group has pre-emptively lowered prices of its retail fibre broadband plans. Based on the price design, Maybank Investment Bank Bhd (Maybank IB) views this effectively as a speed upgrade, and remains hopeful that ARPUs would be largely maintained.
The revised plans would also require access seekers to commit to higher volume, possibly negating the impact of lower unit prices.
The research house said TM’s net profit forecasts and RM6.50 TP DCF-based, assuming 8.6% Weighted Average Cost Of Capital (WACC) and 2% long term growth are unchanged.
It continues to expect TM to largely sustain its fibre broadband revenue (both retail and wholesale) through the offering of higher-speed plans.
Affirmation of this thesis would only manifest in the first half of 2024 “1H’24”, it said.
Price revisions
TM has revised its product pricing for fibre broadband. The lowest 30Mbps plan is now only available as a “Rahmah” initiative.
The 100Mbps plan is lowered to RMR99 per month (from MYR129) along with an incremental RM10 per month limited-time discount, while the 300Mbps plan is lowered to RM139 per month (from MYR149).
Prices for the remaining higher-speed plans are reduced by 17% – 24%. Separately, TM will offer a complimentary speed upgrade to the next speed tier for existing users of the 800Mbps plans and below, to be rolled out in stages over the next three months.
Risk statement
There are several risk factors for our earnings estimates, price target, and rating for TM. Competitive developments, such as price wars would adversely affect monetisation and thus profitability. Regulatory developments pertaining to taxation or product pricing also pose a risk to earnings.
