KUALA LUMPUR (Aug 10): Telekom Malaysia Bhd (KL:TM) may be able to pay special dividends of between 12 and 20 sen in the financial year ending Dec 31, 2026 (FY2026) to FY2028, amid its plan to gear up over the next two to three years.

"We believe many investors have yet to consider the potential share buy-backs and special dividends arising from TM’s plan to gear up to a gross debt-to-earnings ratio of 1.5 times over the next two to three years,” said CIMB Securities.

CIMB Securities cited its preference for Telekom in the sector, underpinned by an April revision of dividend payout policy to at least 75% from 40-60% previously.

"Some investors pushed back against TM raising debt to pay more dividends. We explained that TM is currently under-leveraged, having funded FY2020-FY2025 capex solely with internally generated cash flow, while simultaneously paying down RM6.6 billion of net debt.

"A more efficient capital structure would help to further improve its return on equity,” the house further explained.

On the other hand, investors have taken a “wait and see” stance on CelcomDigi Bhd (KL:CDB), due to modest earnings expectations for FY2026-FY2028 and low valuations. 

However, CIMB Securities predicts a potential rerating of the stock if CelcomDigi can reach its RM465 million costs saving target for FY2026.

The house noted that while most investors awaited concrete signs of cost reductions lifting CelcomDigi's earnings, most were unaware of market repair in the first half of 2026, “which is likely to lead to slightly rosier mobile revenue growth in FY2026-FY2027”.

“We think there is a chance earnings may also positively surprise by 4QFY2026 if CelcomDigi achieves its cost savings target,” CIMB Securities remarked.

On a similar note, the house expects the stock value of Axiata Group Bhd (KL:AXIATA) to remain supported by attractive dividend yields of 5.8%-6.8% for FY2026-FY2028, but noted that any near-term re-rating hinges on the monetisation of its infrastructure asset Edotco.

“Monetisation of Edotco would help to materially pare down Axiata’s gearing levels, as well as enhance its DPS (dividend per share) paying capacity and/or fund a special dividend,” the house said.

CIMB Securities maintained its 'overweight' stance on the telecommunications sector, with 'buy' calls on all three stocks.

Telekom had its target price raised to RM 8.20, while CelcomDigi and Axiata saw its target price increase to RM3.65 and RM2.55 respectively.