KUALA LUMPUR: Public Investment Bank Bhd (PIVB) sees Telekom Malaysia Bhd (TM) as among beneficiaries of the booming information technology (IT) market as major cloud and internet companies would also demand greater terrestrial connectivity as well as global subsea cable networks.

It said in a note that it expects more new infrastructure (namely data centres, internet exchange points,cable landing stations and fibre optic cables) to be developed in Malaysia to cater for the expanding IT load in the future.

"We have yet to factor in any earnings contribution from its collaboration with Singapore Telecommunications to build a greenfield data centre in Johor as we are only expecting this project to be accretive after financial year 2026 (FY2026).

"Although the appointment of the second 5G network operator has been made, we believe there are still roles for TM to play in supporting the 5G ecosystem (namely the leasing of its fibre optics) and hence, is likely to be a beneficiary of the 5G rollout plan of the second network operator," it said.

TM remained PIVB's top pick in the telecom space owing to its leading position as the country's key network infrastructure provider.

PIVB maintained an 'outperform' call for TM with an unchanged target price (TP) of RM8.80.

Similarly, CIMB Securities Sdn Bhd has reiterated a 'buy' call with an unchanged TP of RM7.25.

It expect FY2024 core earnings per share (EPS) to rise seven per cent year-on-year, led by lower cost and net interest expense.

Key re-rating catalysts include value creation from data centre (DC) business expansion, while key downside risks would include fiercer broadband competition, negative regulatory events and lower-than-expected return on investment (ROI) on DC investments.

Meanwhile, MIDF Amanah Investment Bank Bhd is keeping its 'neutral' recommendation on TM with a revised TP of RM6.78.

The research firm said it continues to see some pressure to improve revenue, especially for unifi and TM Global.

Nonetheless, due to stringent cost management, profit before tax (PBT) has recorded a good double-digit improvement.

"The optimism was negated by the normalising tax payment in the absence of tax credit as seen in FY2023.

"This has led to downward earnings pressure. We expect the trend to continue to be seen in the fourth quarter (4Q) of FY 2024," said MIDF.