KUALA LUMPUR: Public Investment Bank Bhd (PIVB) sees Telekom Malaysia Bhd (TM) as among beneficiaries of the booming information technology (IT) market as major cloud and internet companies would also demand greater terrestrial connectivity as well as global subsea cable networks. It said in a note that it expects more new infrastructure (namely data centres, internet exchange points, cable landing stations and fibre optic cables) to be developed in Malaysia to cater for the expanding IT load in the future.

According to BERNAMA News Agency, PIVB has not factored in any earnings contribution from TM’s collaboration with Singapore Telecommunications to build a greenfield data centre in Johor, anticipating the project to be accretive only after financial year 2026 (FY2026). Although a second 5G network operator has been appointed, PIVB believes TM will still play a significant role in supporting the 5G ecosystem, particularly through leasing its fibre optics, thus benefiting from the 5G rollout plan of the seco
nd network operator.

TM remains PIVB’s top pick in the telecom sector, attributed to its leading position as Malaysia’s key network infrastructure provider. PIVB maintained an ‘outperform’ call for TM with an unchanged target price (TP) of RM8.80. Similarly, CIMB Securities Sdn Bhd reiterated a ‘buy’ call with an unchanged TP of RM7.25, projecting a 7% year-on-year rise in FY2024 core earnings per share (EPS), driven by lower costs and net interest expense. Key re-rating catalysts include value creation from data centre (DC) business expansion, while risks involve fiercer broadband competition, negative regulatory events, and lower-than-expected return on investment (ROI) on DC investments.

Meanwhile, MIDF Amanah Investment Bank Bhd maintains a ‘neutral’ recommendation on TM, with a revised TP of RM6.78. The research firm sees ongoing pressure to improve revenue, especially for unifi and TM Global, but notes that stringent cost management has led to a significant improvement in profit before tax (PBT). Howe
ver, the absence of tax credits, as observed in FY2023, has negated this optimism, leading to downward earnings pressure, which MIDF expects to persist into the fourth quarter (4Q) of FY2024.