AmInvestment keeps Hold on Telekom, fair value RM3.30

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KUALA LUMPUR (Sept 7): AmInvestment Bank Research has retained its Hold call on Telekom Malaysia Bhd (TM) at RM3.11, with a fair value of RM3.30.

In a note today, the research house said: “The stock currently trades at a depressed FY18F enterprise value/earnings before interest, taxes, depreciation and amortisation (EV/Ebitda) of 5 times, three standard deviations below its 3-year average of 8 times, mainly due to the rising tide of competition and government-mandated wholesale price cuts.”

Aminvestment said the intensifying broadband competition and implementation of the Mandatory Standard on Access Pricing (MSAP) has reduced wholesale prices for third-party operators to access TM’s high-speed broadband network. 

The research house also commented on a report by a local daily that TM's dominant position in the fixed broadband market is being encroached upon by Tenaga Nasional Bhd's pilot project in Jasin, Melaka to assess the viability deploying its fibre optic network for the government's National Connectivity Plan.

“Tenaga currently has an extensive fibre optic network of over 12,000km and as the sole distributor for electricity in the country, has access to every home in Malaysia, enabling the company to deploy parallel high-speed broadband capability over its power infrastructure,” the note said.

However, with the implementation of the MSAP regime which has reduced domestic wholesale prices for all fibre optic networks since the beginning of the year, AmInvestment Bank said it is uncertain at this stage as to whether the fibre optic venture can be financially viable for Tenaga in areas of low population density. 

The research house believes Tenaga’s plan would be collaborative with TM as its resources, facilitating in its fibre rollout.

“As Tenaga is likely to invest in areas or segments where TM’s fibre network is currently unavailable, we do not expect direct competition between the two operators in the medium term. Hence, we do not expect any near-term impact from this development,” AmInvestment Bank added.

At 10.55am, TM shares traded seven sen higher or 2.25% to RM3.18, with 1.89 million shared done, valuing the group at RM11.95 billion. Year-to-date, the counter has tumbled 49.52%.