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| HwangDBS upgrades TM to hold, sees limited downside |
| Written by Financial Daily | |||
| Wednesday, 17 June 2009 11:22 | |||
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It also noted that TM’s 7% dividend yield “is too high to ignore”. “With a committed minimum 19.6 sen dividend per share, TM shares offer 7.2% net yield (at RM2.70). This is double the yield for the Malaysian market, and is higher than the 5% offered by DiGi.Com Bhd as well as 5% by British American Tobacco Bhd,” said the research house. It raised its discounted cash flow-based (DCF) price target by 10 sen to RM2.90 to factor in the additional cash from the sale of staff mortgages for RM349 million to AmBank Bhd, which generated about 9.8 sen cash per share.  TM, it said, has about RM50 million (1.4 sen/share) staff mortgages left for sale, HwangDBS said. The remaining loans have shorter tenures. HwangDBS also said TM was “unlikely” to dispose additional property assets this year. These assets included Multimedia University, which TM has grown from its in-house training division into an education institution. “We understand that the book value of this university is around RM800 million to RM900 million, with a potentially higher market valuation. The university is self-funding while TM has no urgency to raise funds at the moment,” it added. TM still has around RM2.5 billion cash after its RM4 billion capital distribution last month. HwangDBS also noted that most of the negative news about TM’s poor voice and broadband business had been factored in. However, the stock lacked re-rating catalysts. TM, which signed up its first wholesale customer (Wi-Net Sdn Bhd) recently for its high-speed broadband (HSBB) network, is currently negotiating with others for more deals. “Since the new management (post-demerger with Axiata) had been delivering on their earnings guidance as well as on reducing lumpy provisions and receivable days, we are increasingly confident of TM’s ability to continue meeting our forecast core net income of RM453 million in FY09,” HwangDBS said. TM was flat at RM2.70 yesterday. This article appeared in The Edge Financial Daily, June 17, 2009.
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