KEY INVESTMENT HIGHLIGHTS

• Maintain NEUTRAL with a revised target price of RM6.78 following the 3QFY24 results announcement
• In 3QFY24, higher taxation continues to negate the optimism brought about by effective cost management
• This, nonetheless, was within our expectation as 9MFY24 earnings of RM1.3b made up 76.2% of full year FY24 earnings estimates
• Main concern lies with the group's ability to grow the revenue

FY Commendable cost control. We are keeping our NEUTRAL recommendation on Telekom Malaysia (TM) with a revised target price of RM6.78 pursuant to the release of its 3QFY24 results. We continue to see some pressure to improve revenue, especially for unifi and TM Global. Nonetheless, due to stringent cost management, PBT has recorded a good double-digit improvement. The optimism was negated by the normalizing tax payment in absence of tax credit as seen in FY23.

This has led to downward earnings pressure. We expect the trend to continue to be seen in 4QFY24.

Contraction in earnings. TM's 3QFY24 earnings declined by - 13.6%yoy to RM465.1m. This was mainly attributable to the higher effective tax rate for the quarter-in-review in absence of tax credit observed in 3QFY23.

Meanwhile, 3QFY24 revenue was also down marginally by -1.2%yoy to RM 2.9b due to lower contributions from unifi and TM Global (refer to Figure 1). Despite this, 3QFY24 PBT came in higher at RM668.2m (+32.3%yoy) in view of lower cost across all line items, except for operational cost which increased by +24.3%yoy.

Source: MIDF Research - 27 Nov 2024