Wednesday August 25, 2010
By LEONG HUNG YEE
hungyee@thestar.com.my
Operationally earnings did not decline much, say analyts
PETALING JAYA: Despite recording a lower net profit in its latest quarter, analysts said Telekom Malaysia Bhd’s (TM) results were largely within expectations because operationally its earnings did not decline much.
TM posted a net profit of RM124.4mil in its second quarter ended June 30. This was 53.2% lower than the previous year and 48.8% lower than the preceding quarter.
However, the lower earnings were due to a number of non-operational items. For one, TM’s profits last year were boosted by gains from the disposal of quoted investments and the sale of rights in then-mobile unit Axiata Group Bhd.
In TM’s preceding quarter, it had enjoyed a foreign exchange gain (on translation of foreign currency denominated borrowings) of RM166.6mil. In comparison, TM only enjoyed a RM18.1 mil foreign exchange gain for the quarter under review, which explains the drop in net profit.
To be sure, TM’s lower profit in its latest quarter was also the result of the telco having higher operational cost, which bumped its earnings before interest, tax, depreciation and amortisation (Ebitda) margin to 31.6% from 33.2% in the first quarter of the year.
AmResearch Sdn Bhd said by stripping off TM’s forex gain of RM18.1mil and another one-off gain of RM3.2mil, its net income would have been RM104.2mil.
“We consider this largely within our estimate. We are looking at TM’s second half of financial year ending Dec 31, 2010 to register slightly better numbers due to a more robust Unifi subscriber base,” it said.
AmResearch said the latest quarter did not enjoy the impact of UniFi-related earnings as the service was only launched in late March. AmResearch expects TM’s UniFi to have at least 20,000 subscribers by year-end.
TM said that it has about 12,000 UniFi subscribers. Analysts said this implies a monthly net addition of about 3,000.
Analysts said TM’s operations remained intact and the group managed to register net adds of 56,000 and 17,000 to both its broadband and voice subscribers respectively in the second quarter.
An analyst also pointed out that TM was a dividend play with its strong cash flow. TM will be paying an interim gross dividend of 13 sen per share less 25% tax, or about RM348.8mil, to shareholders by end-September. As at June 30, TM has cash and bank balances of RM3.6bil.
ECM Libra Investment Research said TM had incurred increased costs from rolling out its UniFi services, including having to pay more international gateway fees and advertising and promotion costs for the high-speed broadband service.
“These costs more than offset savings from lower doubtful debts provision, resulting in its Ebitda margin eroding to 32.9% for the first half,” it said.
ECM added that the start of consumer billings for UniFi in July should ease further downward pressure on margins, though TM’s management had cautioned spending would continue as UniFi rollout progresses.
Kenanga Research said TM was optimistic of signing up a major telco player for selling wholesale access to its High Speed Broadband network by September and that this would increase the utilisation of the network.
On the sale of TM’s 15% stake in Measat Global Bhd, OSK Research said TM was waiting for the offer document and would deliberate on the offer after consulting its independent financial adviser.
“We estimate proceeds from the sale of Measat shares would amount to 7 sen per TM share, with TM booking a gain on disposal of RM177mil, based on the written down book value of its investment,” OSK said.
http://biz.thestar.com.my/news/story.asp?file=/2010/8/25/business/6914274&sec=business
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