KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research has raised its target price and earnings forecasts for Telekom Malaysia Bhd's (TM) stock after fourth quarter financial year 2023 (4Q23) core earnings beat expectations.
Record breaking 4Q23 core net profit of RM607 million lifted FY23's core net profit to RM2.2 billion, accounting for 112 per cent and 129 per cent of the firm and consensus full-year estimates, respectively.
The outperformance was attributable to lower-than-expected depreciation and amortisation and corporate tax rate.
The investment bank said it is particularly positive on its cost optimisation measures which is now yielding an impactful outcome.
Leveraging on its extensive fibre reach, TM is perceived to be the critical fundamental building block of government's 5G rollout under MyDigital initiative. Furthermore, TM is well positioned as the sole Malaysian Cloud Service Provider where sovereignty is the utmost important in dealing with government's data.
As such, HLIB research has maintained its "Buy" call on TM with a higher target price of RM7.20 from RM7.18 previously.
"FY24 guidance of rather flattish performance is conservative in our view," it noted. The investment bank raised its FY24 earnings projections, by two per cent.
TM saw its net profit jump 63.6 per cent to RM1.87 billion for FY23 from RM1.14 billion achieved in FY22, amid lower net finance cost and tax impact.
Revenue rose to RM12.26 billion in FY23 from RM12.12 billion previously driven by the strong performance of Unifi and TM Global, according to the group's filing to Bursa Malaysia.
The group also declared a second interim dividend and final dividend totalling 15.5 sen per share, amounting to RM594.9 million.
For the fourth quarter of FY2023, TM's net profit grew by 170.6 per cent to RM433.53 million against RM160.18 million a year ago.
Quarterly revenue improved by 5.1 per cent to RM3.13 billion compared with RM2.98 billion previously.