KUALA LUMPUR (Feb 26): Shares of Telekom Malaysia Bhd (KL:TM) tested their seven-month high on Wednesday after reporting a stronger-than-expected quarter while analysts stay bullish.

Core net profit for FY2024 exceeded consensus estimates by 25% thanks mostly to a one-off tax credit in the final quarter. While earnings will normalise this year, analysts expect steady revenue growth from robust demand at its wholesale and enterprise segments to help maintain dividend payouts.

“We are particularly positive on its cost optimisation measures which [are] now yielding an impactful outcome,” said Hong Leong Investment Bank, which kept the stock on ‘buy’ call. TM is the “fundamental building block” in Malaysia’s 5G dual wholesale network and data centre rollouts, it said.

Shares of TM rose as much as 5% or 35 sen to RM7.05, its highest since July 2024. The stock then eased to RM6.90 at noon after more than 2.4 million shares changed hands. At its last price, the company has a market capitalisation of RM26 billion.

A large majority of analysts are still positive on the stock with 18 ‘buy’, three ‘hold’ and two ‘sell’ calls. The average target price is RM7.78, according to Bloomberg, suggesting a potential return of up to 13% from its last price.

TM’s current valuations are still undemanding at about 13 times its forward earnings while offering a 4.1% dividend yield, CGS International said. “We see continued earnings delivery driving consensus upgrades and higher dividends as the key re-rating catalysts for its shares.”

On its part, TM is forecasting “low single-digit growth” in revenue for FY2025 while earnings before interest and tax are expected to remain at similar levels to FY2024. The company also guided for capital expenditure to make up 14% to 16% of revenue.

There is also potential upside to dividends from TM’s balance sheet strength following the special payout announced on Tuesday, RHB Investment Bank said and told investors to continue buying the stock.

On Tuesday, TM reported FY2024 net profit of RM2.02 billion, up 7.8% year-on-year, while annual revenue was flat at RM11.71 billion.

The company also declared a second interim dividend of 12.5 sen per share and a special dividend of six sen per share, bringing the total dividend payout for the year to 31 sen per share — the highest in the last 10 years.

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