MALAYSIA

INVESTMENT RESEARCH REPORT

KDN PP13226/04/2010 (023662) JF APEX SECURITIES BERHAD
(47680-X)

News Update 26 Mar 2010

Telekom Malaysia Bhd HOLD
Welcome High Speed Broadband! Target Price: RM3.71

Price (25 Mar 2010) RM3.48 Telekom Malaysia Berhad ("TM") has finally announced
KLCI 1312.48 the High Speed Broadband or “HSBB” price. TM has
named its bundled triple play service (HSBB + HyppTV +
Stock Data Voice) as UniFi. Overall, we are positive on the
Bursa / Bloomberg code 4863 / T MK development as the new revenue source should benefit
Board / Sector Main / Telco
TM in the long run. However, it is still too early to
Syariah Compliant status Yes
Issued shares (m) 3543.50
estimate the overall market demand for HSBB, we have
Par Value (RM) 1.00 maintained our Target Price at RM3.71. BUY with
Market cap. (RM m) 12331.38 expected total return of 12.3%.
Price over NTA 1.97x
52-week price Range RM2.58-3.49 Highlights
Beta (against KLCI) 0.47
o HSBB was launched with attractive price – Generally,
3-m Average Daily Volume 5.56m
3-m Average Daily Value^ RM17.78m we believe that the price for the HSBB service is very exciting.
^ based on closing price Business users are able to enjoy speed up to 5Mbps (with
unlimited usage) from a minimum pricing of RM199 per month.
Share Performance (as at 25 Mar 2010) Meanwhile, residential users package starts from RM149
1m 3m 12m (Speed: 5Mbps, max download at 60GB).
Absolute (%) 6.7 13.7 34.0
Relative (%-pts) 3.4 11.3 -9.6 o Expect business user to upgrade to HSBB – As the HSBB
package for business users are relatively more valuable as
Historical PE
compared to Streamyx high-end packages, we believe that
2007 2008 2009
Highest 13.63 64.37 82.52
some of the current high-end Streamyx users may consider to
Lowest 4.22 10.76 16.61 upgrade to HSBB. For example, the current Streamyx 4Mbps
package is priced at RM268/month while HSBB 5Mbps package
Financial Forecast is only priced at RM199 monthly. Besides, we expect HSBB to
(RM ‘m) 08A 09A 10F 11F attract more business users to use its service due to the
Revenue 8675 8608 8780 9044 attractive pricing.
Operating Profit 729 1065 1034 1024
Pretax Profit 353.8 921.6 863.2 853.6 o Residential users may choose to have both HSBB and
Net Profit 276.2 673.3 647.4 640.2 mobile broadband – In our view, the attractive pricing offered
EPS (sen) 23.00 18.30 18.27 18.07 by TM may allow the options for consumers to subscribe to both
P/E 15.13 19.02 19.05 19.26 mobile and fixed broadband at the same time. From RM199
DPS (Sen) 12.00 23.00 20.00 20.00 onwards, high-end consumers may choose to use HSBB in their
Div Yield (%) 7.54 6.61 5.75 5.75 home due to its advantage of being more stable coupled with
Margin: better speed.
EBITDA (%) 32.60 36.05 35.68 35.69
Pretax (%) 4.08 10.71 9.83 9.44 o IPTV channels – IPTV service is bundled within the UniFi
Net Profit (%) 3.18 7.82 7.37 7.08 package via Hypp.TV in which users will be able to watch TV
online by leveraging on the high speed capability of HSBB.
Important Balance Sheet Items (as at 31 Dec 09) However, we noticed that channels available in Hypp.TV are
NTA / share (RM) 1.88 limited and relatively unattractive as compared to channels
Trade Receivables (RM m) 2392.9 provided by Astro.
Total Payables (RM m) 2934.6
Total Assets (RM m) 19942.5 o BUY with a target price of RM3.71 – We have maintained
Net Cash /(Debt) (RM m) -2928.1 our BUY call for TM with a target price of RM3.71 (which is
derived from our Discounted Dividend Model or “DDM”). By
Alan Lim Seong Chun,
combining the price upside of 6.6% with the expected dividend
03-76201118, ext. 812 yield of 5.7%, we reiterate our BUY call for TM with potential
seongchun@jfapex.com.my total return of 12.3%.

Please read carefully the important disclosures at end of this publication

26 Mar 2010 News Update – Telekom Malaysia Bhd JF APEX SECURITIES

Figure 1: HSBB packages for Residential Users

Figure 2: Streamyx packages

Figure 3: TM Historical Price

2
26 Mar 2010 News Update – Telekom Malaysia Bhd JF APEX SECURITIES

JF APEX SECURITIES BERHAD – CONTACT LIST

JF APEX SECURITIES BHD DEALING TEAM RESEARCH TEAM

Head Office: Head Office: Head Office:

6th Floor, Menara Apex Valerie Gan Ai Lynn (ext 3238) Chan Ken Yew (ext 751)
Off Jalan Semenyih Kong Ming Ming (ext 3237) Norhashmilaidi Hashim (ext 758)
Bukit Mewah Shirley Chang (ext 3211) Ng Keat Yung (ext 753)
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Facsimile: (603) 8737 4532 Yap Maow Jun, David (ext 3228)
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Elle Chan (ext 862)

JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK

STOCK RECOMMENDATIONS
BUY : The stock’s total returns* are expected to exceed 10% within the next 12 months.
HOLD : The stock’s total returns* are expected to be within +10% to – 10% within the next 12 months.
SELL : The stock’s total returns* are expected to be below -10% within the next 12 months.
TRADING BUY : The stock’s total returns* are expected to exceed 10% within the next 3 months.
TRADING SELL : The stock’s total returns* are expected to be below -10% within the next 3 months.
SECTOR RECOMMENDATIONS
OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months.
MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to – 10% within the next 12 months.
UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months.
*capital gain + dividend yield

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consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is
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(A Participating Organisation of Bursa Malaysia Securities Berhad)