KUALA LUMPUR (July 5): Kenanga Research has upgraded the telecommunications (telco) sector to "Overweight" and said it believe telcos and investors alike are warming up to the Single Wholesale Network (SWN) model, which they had resisted previously.
In a sector update, the research house said the steep de-rating of the sector in recent months has adequately reflected the market’s reservation on the model, which means a reversal in share prices, may be on the cards once the dust finally settles.
Kenanga said the uncertainties surrounding the 5G rollout have been priced in by the market; thus there will be potential rerating on the sector once the dust finally settles.
“We also see telcos as a service-based industry that is able to maintain their profit margins amidst high inflation by keeping wage pressures at bay.
“Our top picks within the sector are Digi.Com Bhd (OP; TP: RM3.70) and Telekom Malaysia Bhd (OP; TP: RM6.70),” it said.
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