BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Thursday, 31 May, 2012

Results Review

Telekom Malaysia
Inline Progressing steadily
T MK 19,210.6 Equity 3,577.4 5.53 3.75 7,019,67 50.1% 8 Y n.a. Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Khazanah Nasional EPF S. Amanah Saham Bumi 3mth 5.4 3.1 1.7 8.3% 2.9% 0.7 28.7% 11.9% 9.3%

Neutral
Price: Target Price: RM5.37 (-5% upside) RM5.10
TMs 1QFY12 core net earnings of RM181.3m is within our expectation. YoY revenue and core net earnings increased by 11% and 46% respectively due mainly to higher revenue from all key products i.e. internet and multimedia, data, voice and other telecommunications related services with the take up rate of Unifi exceeded expectations. We maintain our FY12 and FY13 earnings forecast and target price unchanged at RM5.10. Maintain our NEUTRAL stance on TM. Higher earnings. YoY net profit rose 53.5% to RM250.6m due to higher revenue and higher unrealised forex gain from USD-denominated debt. Meanwhile core net earnings improved by 46% attributable to positive contributions from internet and multimedia, data, voice and other telecommunications related services. Positive growth in all division. Revenue from internet and multimedia services improved by 24.3% QoQ to RM563.4m, mainly arising from increased UniFi customers. Meanwhile other telecommunications related services revenue improved by 22.9% to RM300.1m QoQ primarily due to higher revenue from customer projects. UniFi has high take up rate. Total broadband customer base grew to 1.97m from 1.77m in the previous year. UniFi subscribers have reached 365,000 customers on the back of 1.22m premises passed over 81 exchange areas. This translates into a take-up rate of 30% against premises passed. With such take up rate, TMs target of 400,000 subscribers by end of 2012 will be easily achieved. Maintaining our forecasts. We maintain our FY12 and FY13 earnings forecasts at RM885.5m and RM945.7m respectively. View & Valuation. Our target price of RM5.10 is unchanged based on DCF methodology with WACC assumption of 9.7%. We are maintaining our NEUTRAL stance on TM.

Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Financial Derivatives Share Performance (%) Absolute vs. KLCI

1mth 1.5 36.6

12mth 43.8 36.6

Financial Highlights FY 31 Dec (RMm) 2009 Turnover 8,608.0 EBIT 708.3 Pretax profit 921.6 Core Net Profit 482.0 Core EPS (sen) 13.5 PER (x) 29.8 DPS (sen) 119.9 Div. Yield (%) 22.3% NTA/share (RM) 1.87 EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBIT Pretax profit Core Net profit Core EPS Share Price Chart
5.50 5.00

2010 8,791.0 852.0 1,360.2 444.9 12.4 15.9 55.0 10.2% 2.07 28.1% 15.5% 9.0% 16.4% 5.9% 0.3

2011 9,150.7 855.1 1,001.2 891.5 24.9 16.1 49.6 9.2% 1.86 29.5% 10.9% -25.4% 16.2% 5.7% 0.3

2012E 9,617.2 985.4 1,275.2 885.5 24.8 18.6 20.0 3.7% 2.00 32.9% 13.3% 15.0% 14.3% 4.9% 0.4

2013E 10,106.9 1,052.1 1,349.0 945.7 26.4 17.5 20.0 3.7% 2.15 32.6% 13.3% 15.0% 14.1% 5.3% 0.1

30.5% 10.7% 26.9% 7.5% 3.0% 0.5

-0.8% -22.3% -5.8% -54.1% -54.1%

2.1% 20.3% 47.6% -7.7% -7.7%

4.1% 0.4% -26.4% 100.4% 100.4%

5.1% 15.2% 27.4% -0.7% -0.7%

5.1% 6.8% 5.8% 6.8% 6.8%

4.50
4.00 3.50

3.00 May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

Thong Pak Leng pakleng.thong@bimbsec.com.my 03-26918887 ext 186

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31 May 2012

Results Review: Telekom Malaysia 1QFY12

1QFY11 2,148.2 192.5 227.3 (52.6) (11.4) 163.3 124.2 3.5 0.2 9.0% 10.6% 5.8% 23.1% 2QFY11 2,233.6 224.4 207.1 (70.1) (9.8) 127.2 114.1 3.2 0.5 10.0% 9.3% 5.1% 33.8% 3QFY11 2,321.7 354.3 337.2 (21.3) (13.7) 302.2 146.4 4.1 0.9 15.3% 14.5% 6.3% 6.3% 4QFY11 2,447.2 115.6 229.6 379.9 (11.2) 598.3 506.8 14.2 0.3 4.7% 9.4% 20.7% -165.5% 1QFY12 2,383.8 204.1 299.3 (40.7) (8.0) 250.6 181.3 5.1 0.3 8.6% 12.6% 7.6% 13.6% QoQ Chg -2.6% 76.6% 30.4% -110.7% -28.6% -58.1% -64.2% -64.2% -1.5% 81.3% 33.8% -63.3% -108.2% YoY Chg 11.0% 6.0% 31.7% -22.6% -29.8% 53.5% 46.0% 46.0% 29.3% -4.5% 18.7% 31.5% -41.2% 1QFY11 2,148.2 192.5 227.3 (52.6) (11.4) 163.3 124.2 3.5 0.2 9.0% 10.6% 5.8% 23.1% 1QFY12 YTD Chg 2,383.8 11.0% 204.1 6.0% 299.3 31.7% (40.7) -22.6% (8.0) -29.8% 250.6 53.5% 181.3 46.0% 5.1 46.0% 0.3 29.3% 8.6% -4.5% 12.6% 18.7% 7.6% 31.5% 13.6% -41.2% Source: BIMB Securities

Quarterly figures
FY 31 Dec (RMm) Revenue EBIT Pretax profit Taxation Minority Interest Net Profit Core Net Profit Core EPS (sen) Net gearing (x) EBIT margin (%) PBT margin (%) Core Net margin (%) Effective tax rate (%)

Income Statement
FY 31 Dec (RMm) Revenue EBITDA Pretax profit Tax MI Net profit Core Net Profit Core EPS (sen) Core EPS growth (%) DPS (sen) NTA/ share (RM) Net gearing (x) PER (x) Div. yield (%) P/ NTA (x) ROE (%) ROA (%) 2009 8,608.0 2,627.3 921.6 (248.3) (30.3) 643.0 482.0 13.5 -54.1% 119.9 1.87 0.5 29.8 22.3% 2.9 7.5% 3.0% 2010 8,791.0 2,474.5 1,360.2 (115.2) (38.5) 1,206.5 444.9 12.4 -7.7% 55.0 2.07 0.3 15.9 10.2% 2.6 16.4% 5.9% 2011 9,150.7 2,696.6 1,001.2 235.9 (46.1) 1,191.0 891.5 24.9 100.4% 49.6 1.86 0.3 16.1 9.2% 2.9 16.2% 5.7% 2012E 2013E 9,617.2 10,106.9 3,159.4 3,293.3 1,275.2 1,349.0 (191.3) (202.3) (48.5) (50.9) 1,035.5 1,095.7 885.5 945.7 24.8 26.4 -0.7% 6.8% 20.0 20.0 2.00 2.15 0.4 0.1 18.6 17.5 3.7% 3.7% 2.7 2.5 14.3% 14.1% 4.9% 5.3% Source: BIMB Securities

Balance Sheet
FY 31 Dec (RMm) Non Current Assets Current Assets Total Assets Current Liabilities Non Current Liabilities Shareholders' Fund Minority Interests Equity & Liabilities 2009 13,762.5 6,180.0 19,942.5 4,441.0 8,371.5 6,987.5 142.5 19,942.5 2010 13,841.5 6,938.5 20,780.0 4,289.5 8,630.3 7,709.4 150.8 20,780.0 2011 14,446.2 6,925.6 21,371.8 4,186.2 10,053.9 6,968.8 162.9 21,371.8 2012E 13,916.3 6,549.3 20,465.6 2,792.0 10,053.9 7,467.7 152.1 20,465.6 2013E 12,462.5 8,691.9 21,154.4 2,918.5 10,053.9 8,026.8 155.3 21,154.4

Source: BIMB Securities

www.bimbsec.com.my

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31 May 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Results Review: Telekom Malaysia 1QFY12

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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