TM down after reporting weaker 2Q results

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KUALA LUMPUR (Aug 30): Telekom Malaysia Bhd (TM) fell as much as 23 sen or 6% to RM3.34 so far today after the group said its second quarter net profit declined to RM101.93 million from RM210.48 million a year earlier.

Yesterday, TM said first half net profit dropped to RM259.09 million from RM440.92 million a year earlier.

At 10:58am today, TM shares recouped some of its losses to trade at RM3.37 with some 13 million units transacted.

Kenanga Investment Bank Bhd wrote in a note today: "(TM's) 1H18 results came in below expectations and the absence of dividend was a negative surprise. Moving forward, TM is set to face challenges post the implementation of MSAP (Mandatory Standard Access Pricing) coupled with heightened fixed broadband competition. Post-review, we reduced our FY18-19E earnings by 9-7%. Downgrade to MARKET PERFORM call with lower DCF (discounted cash flow)-driven TP (target price) of RM3.55."

Affin Hwang Investment Bank Bhd said in a note today: "TM reported a disappointing set of results — 1H18 core net profit fell by 40% y-o-y to RM261 million on lower revenue from the voice and data segments and higher operating expenses. Elsewhere, TM has opened up its entry-level RM79/month Unifi basic plan for all customers. This, in our view, should lead to down trading and erode margins. All in, the operating outlook remains challenging and this may lead to a revision in TM's dividend policy. We cut our FY18-20 EPS forecasts by 14-22% and downgrade TM to SELL (from BUY) with a lower DDM (dividend discount model)-derived price target of RM3.00 (from RM4.00)."