Tuesday, September 13, 2011

RHB Research downgrades telco sector to Neutral

KUALA LUMPUR: RHB Research has downgrade the telecommunications sector from Overweight to Neutral following the uncertainty of the 6% service tax issue.

The research house said on Tuesday, Sept 13 that it believes the setback may be temporary, and it is a matter of time before the telcos pass on the service tax.

It said the Malaysian Communications and Multimedia Commission's approval was not required to pass on the tax while the tax -- essentially a consumption tax to be borne by the final consumer - should be paid by the final consumer.

'However, the uncertainty on the how long the deferment would be is the key issue. After cutting our earnings forecasts, we downgrade DiGi from Outperform to Market Perform with a revised fair value of RM31.50.

'We revised our fair values for Maxis to RM5.65 (previously RM6.00) and Axiata to RM5.35 (previously RM5.60). We prefer TM as our top pick for its capital management potential as we expect another 29 sen/share capital distribution in 2011,' it said.

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