KUALA LUMPUR (Jan 27): Telekom Malaysia Bhd (TM) is currently trading 29 sen or 4.68% higher at RM6.49, putting it on Bursa Malaysia's top gainers list this morning as analysts see it as a key beneficiary of the infrastructure roll-out under the national digital infrastructure plan (Jendela). It saw 8.9 million shares exchanging hands at the time of writing. 

RHB Investment Bank Research upped TM's target price today by 29% to RM7.20 as it believed that the company remains a key beneficiary of the infrastructure roll-out, under Jendela. 

RHB Research’s analyst Jeffrey Tan maintained his “buy” call for TM — its preferred sector pick — with a new discounted cash flow (DCF)-based target price of RM7.20 (from RM5.60 previously), or a 16% upside with 3% yield for FY21F after he rolled forward its valuation base year to FY22F.

“We lift FY21-23F core earnings by 8-12% after imputing stronger internet and data growth assumptions, while expecting further cost vigilance. The stock is trading at 5.1x FY21 EV/EBITDA — at a 36% discount to local peers, and -0.5SD from the historical EV/EBITDA mean,” he noted. 

“We expect the strong unifi net-additions to continue in FY21-22F due to higher fixed/fibre broadband subscriptions from extended work-/study-from-home arrangements, the aggressive targets for fibre premises passed under Jendela, and the ongoing conversion of narrowband/Streamyx customers to fibre,” he added.

TM had revealed recently the company had exceeded the target set under Jendela for the deployment of fixed broadband infrastructure by achieving 124% of its overall committed premises for the year 2020.

Meanwhile, Tan opined that the accelerated digitalisation trend by enterprises is positive for TM's data revenue via demand for cloud services. 

“TM should also benefit from government/Budget 2021 grants/initiatives extended to small and medium-sized enterprises, with renewed public sector ICT spending (after some delays due Covid-19). We gather TM is seeing renewed demand for connectivity and data centre (DC) solutions from over-the-top (OTT) companies, with new deals clinched on content delivery services from an Asian-based OTT player. It may kick-start Phase 2 of its Klang Valley Data Centre, if DC pipelines remain strong,” he added.