CGS-CIMB REITERATES NEUTRAL CALL ON MALAYSIAN TELCO SECTOR

KUALA LUMPUR, Sept 8 -- CGS-CIMB reiterated its "neutral" call on the Malaysian telco sector and still prefer the fixed to mobile segment due to the former’s better revenue growth prospects, more benign competition and enticing valuations.

In a note today, it said a key upside risk to its call is a stronger-than-expected financial year 2021- 2022 forecast earnings delivery, while key downside risks are worse-than-expected competition and adverse regulatory developments. 

CGS-CIMB said for the second quarter of 2021 (Q2 2021), the mobile industry service’s revenue rose 3.8 per cent year-on-year (y-o-y), mainly due to store closures in Q2 2020 following the implementation of the Movement Control Order (MCO).

"It grew 1.5 per cent quarter-on-quarter (q-o-q), partly aided by the government’s Jaringan Prihatin programme and possibly some market share gains," it said.

It noted that Celcom’s revenue market share improved for the fourth straight quarter (+0.5 per cent q-o-q), while in the fixed-line business, Telekom Malaysia's Q2 2021 revenue eased 1.7 per cent q-o-q, largely due to seasonality and some full MCO impact, but rose by a good 6.6 per cent y-o-y.

As for the postpaid segment, CGS-CIMB foresees no easing in the competition between the telcos, adding that there were some limited-time sub acquisition promotions.

It also noted that competition had stiffened in the prepaid segment.

Meanwhile, as for the broadband segment, Maxis had widened its postpaid-fibre bundle lineup to include 30-800 megabits per second (Mbps) fibre plans at end-July 2021, with the entry-level plan now priced 51 per cent higher (with more mobile quota) versus its previous Postpaid Flex-Fibre plan.

"Compared to peers, its packages are on par or slightly more attractive.

"All-in-all, we believe that Maxis’s new offers are not overly aggressive and should not add too much competitive pressure in the fibre broadband market," added CGS-CIMB.

-- BERNAMA