Big 3 telcos’ counters fall, along with broader market, amid competition worries

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KUALA LUMPUR (Aug 7): Share prices of the Big Three telecommunication groups in Malaysia continued to be pressured along with the broad domestic capital market today, amid heightened industry competition for market shares.

As at 3.30pm, Maxis Bhd fell 13 sen or 1.97% to RM6.48, DiGi.Com Bhd declined 14 sen or 2.69% to RM5.06, while Axiata Group Bhd eased 14 sen or 2.28% to RM6.00.

This week alone, DiGi has fallen 38 sen or 7.5% while Maxis dipped 71 sen or 10.94%, and Axiata (fundamental: 0.85; valuation: 1.1) retreated 85 sen or 12.4%.

As at the time of writing today, market breadth saw 799 counters declining, against a mere 127 gainers, while 194 stocks remained unchanged.

Yesterday, CIMB Research issued a note saying that DiGi (fundamental: 1.35; valuation: 1.5)’s prepaid market leadership position was under attack by other players.

It also downgraded the mobile services provider to "reduce" from "hold", and cut the target price to RM5 from RM5.50 previously.

The downgrade, according to CIMB Research, was due to the expectations that DiGi's prepaid market leadership position is under attack from Maxis (fundamental: 1.15; valuation: 1.1) and Celcom Axiata Bhd.

"While the heat from incumbents may ease by year-end, it was worried about TM (Telekom Malaysia Bhd)-P1's entry intensifying competition," according to CIMB telco analyst Foong Choong Chen.

He said DiGi, the third largest telco in the country, was the most vulnerable due to its high prepaid revenue mix.

TM (fundamental: 0.8; valuation: 1.1) fell one sen or 0.15% to RM6.61 as at 3.31pm today.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)