Tuesday, September 6, 2011

RHB Research keeps Overweight on telecoms sector

KUALA LUMPUR: RHB Research Institute said the recent financial results of the telecommunications stocks under coverage came in within expectations, except for Axiata Group Bhd which disappointed due to the stronger ringgit and lower-than-expected numbers from Celcom.

It said on Tuesday, Sept 6 that with few signs of irrational pricing, competition in the industry appears stable. This should bode well for the sector as a defensive pick given external uncertainties going forward.

RHB Research said it likes DiGi for the highest potential in term of revenue growth (12%) in its coverage, while also offering a decent dividend yield (4.5%).

'Besides that, we believe DiGi will benefit the most among its peers as the cellco with potentially the highest exposure (about 70%) of its revenue coming from prepaid services, if it no longer has to absorb the 6% service tax,' it said.

The research house, in its comments on Axiata, said it believed the telco was stuck in a conundrum, offering neither attractive growth nor yields. Besides that, regulatory risks in India and Bangladesh may continue to bog down the stock.

As for Maxis Bhd, it said the telco would be another major beneficiary (about 50% of revenue from prepaid services) if the 6% service tax is passed on to prepaid subscribers if implemented in 4QCY11, pending Malaysian Communications and Multimedia Commission approval. FY11 net dividend yield is attractive at 7.4%.

RHB Research said it liked TM for improving fundamentals in its high-speed broadband'' business and high dividends potential.

'We see ample room for TM to declare another 29 sen/share capital distribution for FY11,' it said.

The research house said it maintained its Overweight stance on the sector due to the potential catalyst on the 6% service tax and the sector's defensive qualities.

'Our top pick is DiGi as the biggest beneficiary if the 6% service tax is passed on to prepaid users. We also like TM's capital management potential as we expect another 29 sen/share capital distribution in 2011,' it said.

No comments:

Post a Comment