PETALING JAYA: Strong growth in Unifi subscriber base is expected for Telekom Malaysia Bhd (TM), driven by the expansion in coverage and continued demand for home fibre.

       As economic sectors reopen, the group’s enterprise revenues are expected to recover as it resumes deliveries onto enterprise customer premises.

       While the Unifi average revenue per user (Arpu) erosion is expected, Kenanga Research, however believes that the continued subscriber growth will outweigh the arpu erosion, and positively contribute to Unifi’s revenue.

       TA Research meanwhile said TM management had maintained its earlier guidance for revenue growth of flat-to-low single digit percentage and earnings before interest and taxes (Ebit) of more than RM1.6bil for the current financial year 2021 (FY21).

       This would see TM resuming revenue growth after three consecutive years of decline and, this will be aligned to its ‘New TM’ Transformation Programme (2021-2023) which is focused on customer experience, revenue growth, and cost optimisation.

       However, Maybank IB Research felt that the RM1.6bil ebit figure appears conservative.

       TM last week announced its first half 2020 financial results with revenue rising by 8% driven by growth across all three product lines. Voice was marginally up by 2%, while Internet rose 6%, boosted by Unifi subs growth, and data jumped 16%.

       Kenanga Research noted that while discussions between TM and the government to move the public sector data onto TM’s cloud are still ongoing, it believed that revenue contribution will commence in FY22.

       Post results, Kenanga Research maintained its FY21 and FY22 profit estimates.

       It also retained its “outperform’’ call with a target price (TP) of RM7 a share. TA Securities has a “buy’’ call with the same TP. Maybank IB Research also has a “buy’’ call with a TP of RM7.40 a share.

       CGS-CIMB Research retained its forecasts given the in-line set of financial results, and see FY21, FY22 and FY23 core earnings per share rising 17.9%, 17.8% and 18.7% year-on-year on revenue recovery, with cost controls buffering any pressure from its fibre rollout acceleration.

       It also believed that the key re-rating catalyst for TM is stronger FY21-FY22 earnings while maintaining an “add’’ call with a higher TP of RM7.50 a share.