PETALING JAYA: The demand for home fibre will continue to increase and so will Internet revenue for Telekom Malaysia Bhd (TM), according to analysts.

       This is backed by four consecutive record-setting quarters from the third quarter of 2020 (Q3’20) to Q2’21. The quarter-on-quarter (q-o-q) Unifi net additions are still strong at above 100,000.

       “Internet revenue, which makes up 35% of total revenue, is expected to rise by 2% to 4% q-o-q. It was 8% to 10% year-on-year (y-o-y) in Q3’21,” said CGS-CIMB Research in its report.

       This is led by robust home fibre demand as the various government-imposed movement restrictions were still largely in place in Q3’21.

       TM had also accelerated fibre coverage expansion in Q3’21 and it was 187% above target based on the national digital infrastructure plan (Jalinan Digital Negara or ？Jendela) progress report.

       However, the research house expected average revenue per user to ease further by 1% to 3% q-o-q (down 6% to 8% y-o-y) due to new subscribers from secondary towns signing up for lower-priced plans.

       TM is expected to announce its Q3’21 financial results next week.

       The research house said after a softer Q2’21, weighed down mainly by manpower optimisation costs, it projected core net profit to rise 10% to 14% q-o-q (down 0% to 3% y-o-y) to between RM280mil and RM290mil for Q3’21.

       This should bring nine months 2021 core net profit to between RM865mil and RM875mil (up 8% to 10% y-o-y). This will be in line with expectations at 74% to 75% of its own 2021 forecast and 76% to 77% of analysts’ consensus.

       It estimated data revenue of about 27% of total to be stable q-o-q in Q3’21. Y-o-y, it will likely be up mid-single digit, driven by the continued growth in fibre leasing demand for mobile backhaul and wholesale high-speed broadband access.

       It said other revenue may remain subdued q-o-q (down 2% to 3%) as movement restrictions likely still held back delivery of customer information and communications technology projects but up 5% to 7% y-o-y as Q3’20 was also affected by the first movement control order.

       It estimated Q3’21 earnings before interest tax depreciation and amortisation margin to rise zero to one percentage point q-o-q (down 0.5% to 1.5% percentage points y-o-y) to about 38%.It said while TM’s voluntary separation scheme was extended into Q3’21, the manpower optimisation cost is likely to be lower q-o-q (Q2’21: about RM80mil).

       Other operational expenditure (opex) could also normalise as Q2’21 included some one-off costs such as the cleaning up of old accounts.

       The research house retained its earnings forecasts, target price of RM7.50 a share and a “buy’’ rating for TM pending the release of the financial results.

       It said the key re-rating catalysts are stronger 2021 to 2022 earnings. The key downside risks included higher-than-expected opex and adverse regulatory developments.