This article first appeared in The Edge Financial Daily on May 31, 2019

KUALA LUMPUR: Telekom Malaysia Bhd’s (TM) shares rallied to a nine-month high yesterday after the telecommunications group announced an almost doubling of its net profit for the first quarter ended March 31, 2019 (1QFY19).

Its shares closed at its nine-month high of RM3.46 yesterday after jumping 74 sen or 27.21%, with 96.4 million shares traded. In the final hour before market closed, it hit as high as RM3.53.

The stock was the top gainer on Bursa Malaysia yesterday, and it was the second most actively traded counter. The rally expanded its market capitalisation by about RM2.77 billion in a day to RM13 billion from RM10.23 billion on Wednesday.

The group said yesterday that its 1QFY19 profit surged to RM308.28 million from RM157.16 million a year ago, thanks to a decline in the group’s operating cost. Earnings per share rose to 8.2 sen, from 4.18 sen previously.

This is despite revenue retreating a marginal 2.4% to RM2.78 billion from RM2.85 billion, due to a decline in voice, Internet and multimedia services and non-telecommunication related services revenue.

In a statement, TM said stripping off some non-operational items, such as unrealised foreign exchange loss on international trade settlement, its normalised earnings before interest and tax more than doubled to RM513 million from RM206.6 million last year, while normalised net profit would also be more than double at RM296.4 million.

TM acting group chief executive officer Imri Mokhtar said revenue challenges unexpectedly continued to persist into 1QFY19, with intensifying competition and price erosion.

“However, I’m pleased to report that our Performance Improvement Programme (PIP) 2019-2021 is yielding results. We recorded improved operational efficiency and increased profitability. Our operating expenditure/revenue also improved by 11.4 percentage points, whilst profit for the quarter also doubled mainly from the cost optimisation efforts undertaken to counter revenue decline,” he said.

The group’s total capital expenditure (capex) for 1QFY19 was in line with guidance at RM151 million, or 5.4% of revenue.

“Our capex spending was lower compared with 1QFY18 and within our guidance, as we continue to sweat our assets and optimise our network. We expect the industry and competitive landscape to continuously evolve.

“We remain focused on delivering our strategies of accelerating convergence and empowering digital to enable a digital Malaysia whilst we strengthen our resilience with our PIP initiatives and improve on customer experience,” Imri said.

Going forward, TM expects the market to be increasingly competitive, with players exploring opportunities to sustain and grow their business.