malaysia industry focus telecommunication...maxis started to offer competitive rates for idd again,...

www.dbsvickers.com

ed- SGC / sa- WMT

Prefer fixed-line operators • CelcomCelcomCelcomCelcom’s’s’s’s recent move recent move recent move recent move to cut data pricing could to cut data pricing could to cut data pricing could to cut data pricing could

disrupt disrupt disrupt disrupt the the the the mobile marketmobile marketmobile marketmobile market

• We cut FY15We cut FY15We cut FY15We cut FY15----17F EPS by 217F EPS by 217F EPS by 217F EPS by 2----9% for mobile operators9% for mobile operators9% for mobile operators9% for mobile operators

• Remain cRemain cRemain cRemain cautious on mobile operators; further autious on mobile operators; further autious on mobile operators; further autious on mobile operators; further decline in data pricing decline in data pricing decline in data pricing decline in data pricing is a riskis a riskis a riskis a risk to earnings and capexto earnings and capexto earnings and capexto earnings and capex

• TMTMTMTM (upgrade to Buy)(upgrade to Buy)(upgrade to Buy)(upgrade to Buy) and TIMEand TIMEand TIMEand TIME areareareare ourourourour stockstockstockstock pipipipickckckckssss for the sectorfor the sectorfor the sectorfor the sector

Flat growth. Overall, service revenue growth for Malaysia

mobile industry is relatively flat (+0.8% y-o-y) in 1Q15. The

strong growth of data revenue was offset by falling voice and

SMS revenues. Maxis and DiGi achieved 4.4% and 2.2% y-o-y

growth, respectively, largely at the expense of Celcom (-4.4%)

again. Celcom continued to suffer from unresolved IT issues

and weak distribution channels in 1Q15.

Celcom is responding by cutting data pricing. Competition

among the Big 3 telcos has intensified since April, when

Celcom introduced a new entry-level postpaid plan which

significantly undercut all its competitors’ plans, offering

promotional 3GB data at RM38/month. It also recently slashed

its 1GB mobile internet plan to RM25/month (from RM28-30)

after refreshing its prepaid plan. Celcom’s new data plans are

disruptive in a few ways. First, it is an outright reduction in

pricing. Second, the pricing of its new data plan is considerably

lower not only when compared to Maxis and DiGi, but to U

Mobile as well. And lastly, Celcom now allows unutilised data

to be carried forward for all its prepaid and postpaid plans, the

first telco in Malaysia to do that.

Cut FY15-17F EPS by 2-9%. To reflect lower data pricing and

a reversal in GST treatment for prepaid revenue, we cut FY15-

17F earnings of mobile operators by 2-9% after lowering

ARPU assumptions.

Cautious on mobile operators; prefer TM and TIME. We

remain cautious on mobile operators as a further decline in

data pricing could pose a risk to earnings as well as capex,

especially as TM will also launch its wireless services in the next

12 months. However, we remain optimistic of the eventual

rollout of High-Speed Broadband 2 (HSBB2), Sub-Urban

Broadband (SUBB) and wireless services that will drive further

growth for TM. We upgrade TM to BUY (from Hold) with DCF-

based TP of RM7.65, as the recent correction in its share price

should have priced in the near-term drag on earnings due to

slower turnaround of P1 operation.

KLCIKLCIKLCIKLCI :::: 1,735.631,735.631,735.631,735.63

Analyst Woo Kim TOH +603 2604 3917 [email protected]

STOCKS

Source: AllianceDBS

Axiata GroupAxiata GroupAxiata GroupAxiata Group :::: Regional cellular operator

Digi.ComDigi.ComDigi.ComDigi.Com :::: A Malaysia-focused cellular operator

Maxis BhdMaxis BhdMaxis BhdMaxis Bhd :::: Largest Malaysian cellular operator by subscribers

Telekom MalaysiaTelekom MalaysiaTelekom MalaysiaTelekom Malaysia :::: Dominant fixed-line operator in Malaysia

TIME dotCom BhdTIME dotCom BhdTIME dotCom BhdTIME dotCom Bhd :::: A data-centric, fixed-line telecommunication provider

1Q15 revenue market share of Big 3 telcos in Malaysia

DiGi

29.1%

Maxis

39.0%

Celcom

31.8%

Source: Companies, AllianceDBS

DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity

11 Jun 2015

Malaysia Industry Focus

Telecommunication

Refer to important disclosures at the end of this report

Price Price Price Price Mkt CapMkt CapMkt CapMkt Cap Target PriceTarget PriceTarget PriceTarget Price Performance (%)Performance (%)Performance (%)Performance (%)

RMRMRMRM US$mUS$mUS$mUS$m RMRMRMRM 3 mth3 mth3 mth3 mth 12 mth12 mth12 mth12 mth RatingRatingRatingRating

Axiata Group 6.46 14,848 6.45 (7.5) (6.2) HOLD Digi.Com 5.61 11,648 6.00 (10.5) 2.2 HOLD Maxis Bhd 6.66 13,355 5.80 (5.8) (0.5) FULLY

VALUED Telekom Malaysia 6.78 6,734 7.65 (4.1) 9.7 BUY TIME dotCom Bhd 6.68 1,024 7.05 18.7 49.1 BUY

Industry Focus

Telecommunication

1Q15 results round1Q15 results round1Q15 results round1Q15 results round----upupupup

Disappointing on hindsightDisappointing on hindsightDisappointing on hindsightDisappointing on hindsight. The major disappointment for the

sector was that TM’s earnings were dragged by higher operating

costs and losses at P1. Axiata also reported weaker results but

this had been cautioned by management earlier. On hindsight,

DiGi and Maxis’ results (reported much earlier) are now slightly

below expectations given the recent U-turn in GST pricing and

rising competition. TIME continued to report good results due to

strong growth of data revenue, underpinned by an increase in

global bandwidth sales.

Tepid Tepid Tepid Tepid service revenue growth in 1Q15service revenue growth in 1Q15service revenue growth in 1Q15service revenue growth in 1Q15. Overall, we estimate

service revenue for Malaysia’s mobile industry was relatively flat

(+0.8% y-o-y) in 1Q15. The strong growth of data revenue was

offset by falling voice and SMS revenues. Like the previous

quarter, the above-average growth achieved by Maxis (+4.4%)

and DiGi (+2.2%) was largely at the expense of Celcom (-4.4%).

Celcom continued to suffer from its unresolved IT issues and

weak distribution channels in 1Q15.

Competition heating up inCompetition heating up inCompetition heating up inCompetition heating up in prepaid segment. prepaid segment. prepaid segment. prepaid segment. Maxis added 355k

prepaid subscribers in 1Q15, ahead of DiGi’s 233k. Meanwhile,

Celcom lost 690k subscribers. We believe price competition

intensified in 1Q15, particularly in the migrant worker segment.

Maxis started to offer competitive rates for IDD again, and this

seems to have dented DiGi’s prepaid ARPU in 1Q15.

EXHIBIT 1: Prepaid subscribers (in ‘000)

6,000

8,000

10,000

12,000

1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15

DiGi Maxis Celcom

Sources: Companies

Similar trend for postpaidSimilar trend for postpaidSimilar trend for postpaidSimilar trend for postpaid. . . . In the postpaid segment (excluding

wireless broadband), Celcom lost 110k subscribers while DiGi

and Maxis added 37k and 19k subscribers in 1Q15, respectively.

The loss at Celcom indicates smaller players (especially U Mobile)

also gained some subscribers. Apart from IT issues, we think

Celcom also lacked entry-level postpaid plans to attract the low-

end segment, resulting in subscriber loss. This seems to be the

case as Celcom has recently introduced a new entry-level

postpaid plan that undercuts competitors’ offerings.

EXHIBIT 2: Postpaid subscribers, excluding WBB (in ‘000)

1,000

1,500

2,000

2,500

3,000

1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15

DiGi Maxis Celcom

Sources: Companies

Celcom getting aggressive

Celcom is Celcom is Celcom is Celcom is ccccutting data pricesutting data pricesutting data pricesutting data prices. Based on current usage level, we

examine: 1) Prepaid plans with 1GB of data; and 2) entry-level

postpaid plans (see Exhibit 3 and 4). Until recently, we observe

that the Big 3 telcos (Celcom, DiGi, and Maxis) have kept base

monthly data pricing relatively stable at RM25/GB for postpaid

and RM30/GB for prepaid, despite more aggressive pricing by U

Mobile at RM17/GB for postpaid and RM25/GB for prepaid since

early 2015.

However, we believe competition among the Big 3 telcos has

intensified since late April when Celcom introduced a new entry-

level postpaid plan which significantly undercut all competitors’

plans, offering promotional 3GB data at RM38/month (non-

promo 2GB) as long as users subscribe within the promotion

period and do not churn out. Celcom also recently slashed its

1GB mobile internet plan to RM25/month (from RM28-30/month

in previous quarters) after refreshing its prepaid plan.

As Celcom has lost close to one million subscribers since mid-

2014, the company is aggressive on data pricing in order to

regain subscribers. We believe Celcom intends to attract prepaid

subscribers to convert to postpaid and retain them as well, as its

RM38 entry-level postpaid plan is much cheaper than any plans

in the market currently (whether prepaid or postpaid).

DiGi and Maxis DiGi and Maxis DiGi and Maxis DiGi and Maxis not cutting data pricing not cutting data pricing not cutting data pricing not cutting data pricing yetyetyetyet.... Instead, both

companies are running limited time promotions with several

freebies such as 50% extra data quota and free data during off-

Industry Focus

Telecommunication

peak hours. Nevertheless, we believe it is a matter of time before

they adjust their plans to match Celcom’s pricing, especially since

Celcom is a bigger competitor relative to U Mobile. In addition,

this will also be in line with the government’s aim to promote

affordable broadband packages and reduce cellular rates.

EXHIBIT 3: Mobile internet plan/passes for prepaid (based on 1GB data for at least 30 days validity)

Maxis Celcom DiGi U Mobile

#Hotlink Xpax Magic Sim Easy/Best Prepaid UMI 25

Monthly Internet pass RM30 RM25 RM30 RM25

Data quota 1GB 1GB 1GB 1GB

+ Free promotional data 1GB (12am - 7 am) - 500MB -

Remarks/Others Free Spotify Premium Unused data carried forward

Free 150 on-net calls or SMS

Free 300MB data when

reload >RM30

Free 30min on-net calls

everyday

Free Youtube Streaming

(2am-10am)

Sources: Companies

EXHIBIT 4: Entry-level postpaid plans

Maxis Celcom DiGi U Mobile

Surfmore 50 First Basic 38 Smartplan 50 (High Data) P50

Monthly fee RM50 RM38 RM50 RM50

Data quota 2GB 2GB (3GB promo) 2GB 3GB

Calls

On-net 12 sen 15 sen 15 sen 10 sen

Off-net 20 sen 15 sen 15 sen 10 sen

SMS

On-net 5 sen 15 sen 10 sen 5 sen

Off-net 15 sen 15 sen 10 sen 8 sen

Remarks/Others Free 50min calls & 50 SMS Free 100min calls & 100 SMS Free 50min calls

Free Celcom WiFi data

Unused data carried forward

Free 30min on-net calls

everyday

Sources: Companies

Celcom putting pressure on data pricing

While data revenue per GB for the telcos has been declining (see

Exhibit 5 and 6), we believe this largely reflects subscribers

moving up the different pricing tiers (higher volume, lower

RM/GB) as their data usage increase. Overall, data monetisation

for the telcos has been healthy, with data ARPU per subscriber

relatively stable at RM24-26 in the past few quarters.

.

EXHIBIT 5: DiGi subscriber data usage and revenue trend

0.59 0.65 0.75 0.82 0.84 1.00

4038

3431 29

25

-

0.20

0.40

0.60

0.80

1.00

1.20

-

10

20

30

40

50

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

Average data usage per user (in GB) Data revenue (RM/GB)

Source: DiGi

Industry Focus

Telecommunication

EXHIBIT 6: Maxis subscriber data usage and revenue trend

0.99 0.98 1.18 1.23

25 26

2220

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

-

5

10

15

20

25

30

1Q14 2Q14 3Q14 4Q14

Average data usage per user (in GB) Data revenue per GB

Source: Maxis

Celcom’s new data plans are disruptive in a few ways. First, it is

an outright reduction in pricing, in contrast to past practices of

giving more value to subscribers (while maintaining ARPU) in

response to competition. Second, the pricing of its new data plan

is considerably lower, not only when compared to Maxis and

DiGi, but also to U Mobile as well. And lastly, Celcom now allows

unutilised data to be carried forward for all its prepaid and

postpaid plans, the first telco in Malaysia to do that.

Earnings revision

Cut eCut eCut eCut earnings arnings arnings arnings ofofofof mobile operatorsmobile operatorsmobile operatorsmobile operators. We cut FY15-17F earnings by

2-9% after lowering ARPU assumptions to reflect the reduction

in data pricing and the reversal of GST treatment of prepaid

revenue. We think DiGi will be affected the most given its higher

proportion of prepaid revenue, and its market positioning in the

low-end or value-for-money segment of the market.

Maxis is affected less due to its positioning in the mid/high-end

segment, especially for postpaid. We also tweaked subscriber

assumptions for Maxis due to the operational improvements and

positive turnaround in net adds over the last two quarters.

EXHIBIT 7: Earnings revision

FY15FFY15FFY15FFY15F FFFFY16FY16FY16FY16F FY17FFY17FFY17FFY17F

AxiataAxiataAxiataAxiata -2.5% -2.3% -2.2%

DiGiDiGiDiGiDiGi -6.5% -9.1% -9.2%

MaxisMaxisMaxisMaxis -2.1% -2.1% -1.9%

Source: AllianceDBS

Reversal Reversal Reversal Reversal ofofofof GST treatmentGST treatmentGST treatmentGST treatment. The regulator has given six months

grace period for mobile operators to comply with instructions to

charge GST upon usage, instead of the current practice of levying

6% GST on top of the reload value. Hence, revenue recognition

is likely to be the same as before, when mobile operators

absorbed the 6% service tax on behalf of prepaid subscribers.

We had previously assumed a 3% effective increase in prepaid

revenue for the mobile operators as we assumed they would pass

on the 6% GST to prepaid subscribers.

Valuation and recommendation

EXHIBIT 8: Revised TP (in RM)

Previous TPPrevious TPPrevious TPPrevious TP Revised TPRevised TPRevised TPRevised TP RecoRecoRecoRecommmm

AxiataAxiataAxiataAxiata 6.60 6.45 Hold

DiGiDiGiDiGiDiGi 6.60 6.00 Hold

MaxisMaxisMaxisMaxis 5.85 5.80 Fully Valued

TMTMTMTM 7.65 7.65 ↑Buy

TIMETIMETIMETIME 7.05 7.05 Buy

Sources: AllianceDBS

Still cautious on mobile operatorsStill cautious on mobile operatorsStill cautious on mobile operatorsStill cautious on mobile operators. Share price performances of

mobile operators have been lackluster, falling 6-9% in the past

three months. We believe this was mainly due to the reversal of

GST treatment on prepaid revenue, where expectations had been

built in previously, and signs that competition is heating up in the

mobile market. We remain cautious of mobile operators as

further declines in data pricing could pose some risk to earnings

as well as capex, especially as TM will also launch its wireless

services in the next 12 months.

Upgrade TM to BuyUpgrade TM to BuyUpgrade TM to BuyUpgrade TM to Buy. The share price has fallen by 11% from its

recent peak, especially after the company reported weak 1Q15

results. This suggests investors have priced in a near-term drag

on earnings as a result of a slower turnaround at P1. We remain

optimistic of the eventual rollout of HSBB2, SUBB and wireless

services that will drive further growth for TM as it rolls out the

high-speed network in more areas.

Industry Focus

Telecommunication

EXHIBIT 9: Peers comparison table

LC USD CY15 CY16 CY15 CY16 CY15 CY16 CY15 CY16 CY15 CY16

Axiata Hold MYR 6.45 6.46 14,848 24.8x 23.6x 3.6% 4.5% 2.9x 2.6x 9.6x 9.2x 1.2x 1.5x

Maxis FV MYR 5.80 6.66 13,355 26.3x 24.6x 4.1% 4.2% 10.9x 10.6x 13.3x 12.9x 1.7x 1.7x

DiGi.Com Hold MYR 6.00 5.61 11,648 21.5x 21.5x 4.7% 5.0% 69.9x 63.6x 13.2x 12.4x 0.2x 0.2x

Telekom Buy MYR 7.65 6.78 6,734 26.8x 26.1x 3.4% 4.0% 3.4x 3.3x 7.4x 7.1x 0.8x 0.6x

TIME dotCom Buy MYR 7.05 6.68 1,024 22.4x 22.7x 1.1% 1.3% 1.1x 1.5x 12.6x 10.6x nm nm

Singtel Buy SGD 4.40 4.12 48,594 17.5x 16.7x 4.5% 4.8% 2.5x 2.6x 9.3x 8.8x 1.0x 0.9x

Starhub Hold SGD 4.10 4.02 5,139 18.7x 17.9x 5.0% 5.2% 47.9x 36.2x 9.4x 9.0x 0.5x 0.5x

M1 Buy SGD 3.60 3.40 2,356 18.1x 17.1x 5.9% 6.1% 8.5x 7.8x 9.7x 9.4x 0.8x 0.7x

PT Telekom Buy IDR 3200 2860 21,601 19.5x 17.7x 4.5% 4.8% 4.2x 4.1x 6.6x 6.4x 0.1x nm

XL Axiata Buy IDR 4970 3800 2,432 nm 34.6x 1.6% 2.4% 3.0x 2.2x 6.1x 5.6x 2.8x 2.2x

Indosat Hold IDR 4250 3680 1,498 nm 30.0x 0.0% 0.0% 1.6x 1.4x 3.3x 3.1x 1.7x 1.4x

Advance Info Service Hold THB 225.00 233.00 20,550 19.2x 18.3x 5.5% 6.6% 16.0x 14.6x 10.3x 10.0x 0.2x 0.5x

Intouch Holdings Hold THB 90.00 77.25 7,309 15.8x 13.7x 6.3% 7.2% 17.6x 17.6x 15.6x 13.6x nm nm

Total Access Comm Hold THB 88.00 87.00 6,148 20.6x 19.7x 4.8% 5.1% 6.4x 7.8x 7.2x 6.9x 1.0x 0.9x

ThaiCom Hold THB 40.16 37.50 1,213 16.4x - 3.0% - 2.5x 2.2x 0.1x - nm -

Average 19.2x 19.3x 4.5% 4.9% 12.3x 11.2x 9.7x 9.2x 0.8x 0.7x

Call LC

Target

PriceNet Debt/EBITDADivd yield

Current

Price

Market

CapP/E Price/ BVPS EV/EBITDA

Sources: AllianceDBS

Industry Focus

Telecommunication

Axiata (HOLD; RM6.46; AXIATA MK; Price Target : RM6.45)

Income Statement (RM m) Balance Sheet (RM m)

FY FY FY FY DecDecDecDec 2014201420142014AAAA 2015201520152015FFFF 2016201620162016FFFF 2017201720172017FFFF FY FY FY FY DecDecDecDec 2014201420142014AAAA 2015201520152015FFFF 2016201620162016FFFF 2017201720172017FFFF

Turnover 18,712 18,551 19,432 20,142 Net Fixed Assets 19,933 21,039 21,699 21,971 Cost of Goods Sold (11,713) (11,593) (12,079) (12,448) Invts in Associates & JVs 7,557 8,002 8,484 9,006 Gross ProfitGross ProfitGross ProfitGross Profit 6,9996,9996,9996,999 6,9586,9586,9586,958 7,3537,3537,3537,353 7,6947,6947,6947,694 Other LT Assets 13,321 13,321 13,321 13,321 Other Opng (Exp)/Inc (3,702) (3,301) (3,351) (3,438) Cash & ST Invts 5,116 2,937 2,284 1,813 Operating ProfitOperating ProfitOperating ProfitOperating Profit 3,2973,2973,2973,297 3,6583,6583,6583,658 4,0024,0024,0024,002 4,2564,2564,2564,256 Inventory 80 62 65 67 Other Non Opg (Exp)/Inc (125) 0 0 0 Debtors 3,062 2,473 2,591 2,686 Associates & JV Inc 382 445 482 522 Other Current Assets 59 59 59 59 Net Interest (Exp)/Inc (548) (619) (670) (690) Total AssetsTotal AssetsTotal AssetsTotal Assets 49,12749,12749,12749,127 47,89347,89347,89347,893 48,50348,50348,50348,503 48,92248,92248,92248,922 Exceptional Gain/(Loss) 109 0 0 0 PrePrePrePre----tax Profittax Profittax Profittax Profit 3,1143,1143,1143,114 3,4843,4843,4843,484 3,8143,8143,8143,814 4,0884,0884,0884,088 ST Debt 1,949 1,949 1,949 1,949 Tax (770) (972) (1,010) (1,069) Creditor 8,375 6,624 6,902 7,113 Minority Interest 4 (164) (201) (209) Other Current Liab 236 236 236 236 Preference Dividend 0 0 0 0 LT Debt 11,945 11,945 11,945 11,945 Net ProfitNet ProfitNet ProfitNet Profit 2,3492,3492,3492,349 2,3482,3482,3482,348 2,6032,6032,6032,603 2,8102,8102,8102,810 Other LT Liabilities 4,066 4,066 4,066 4,066 Net Profit before Except. 2,240 2,348 2,603 2,810 Shareholder’s Equity 20,745 21,097 21,227 21,227 EBITDA 7,133 7,090 7,497 7,870 Minority Interests 1,813 1,977 2,178 2,387 Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab. 49,12749,12749,12749,127 47,89347,89347,89347,893 48,50348,50348,50348,503 48,92248,92248,92248,922 Sales Gth (%) 1.9 (0.9) 4.8 3.7 EBITDA Gth (%) (5.3) (0.6) 5.7 5.0 Non-Cash Wkg. Capital (5,410) (4,266) (4,424) (4,537) Opg Profit Gth (%) (19.7) 11.0 9.4 6.3 Net Cash/(Debt) (8,778) (10,957) (11,610) (12,080) Net Profit Gth (%) (7.9) 0.0 10.9 8.0 Effective Tax Rate (%) 24.7 27.9 26.5 26.1 Cash Flow Statement (RM m) Rates & Ratio


Pre-Tax Profit 3,114 3,484 3,814 4,088 Gross Margins (%) 37.4 37.5 37.8 38.2 Dep. & Amort. 3,672 3,432 3,495 3,614 Opg Profit Margin (%) 17.6 19.7 20.6 21.1 Tax Paid (909) (972) (1,010) (1,069) Net Profit Margin (%) 12.6 12.7 13.4 14.0 Assoc. & JV Inc/(loss) (382) (445) (482) (522) ROAE (%) 11.6 11.2 12.3 13.2 Chg in Wkg.Cap. 1,867 (1,144) 158 114 ROA (%) 5.1 4.8 5.4 5.8 Other Operating CF (1,777) 0 0 0 ROCE (%) 6.4 6.5 7.1 7.6 Net Operating CFNet Operating CFNet Operating CFNet Operating CF 5,5845,5845,5845,584 4,3554,3554,3554,355 5,9755,9755,9755,975 6,2256,2256,2256,225 Div Payout Ratio (%) 80.4 85.0 95.0 100.0 Capital Exp.(net) (3,887) (4,538) (4,155) (3,885) Net Interest Cover (x) 6.0 5.9 6.0 6.2 Other Invts.(net) 218 0 0 0 Asset Turnover (x) 0.4 0.4 0.4 0.4 Invts in Assoc. & JV (212) 0 0 0 Debtors Turn (avg days) 56.0 54.5 47.6 47.8 Div from Assoc & JV 167 0 0 0 Creditors Turn (avg days) 328.7 335.4 287.6 289.5 Other Investing CF (2,632) 0 0 0 Inventory Turn (avg days) 3.2 3.2 2.7 2.7 Net Investing CFNet Investing CFNet Investing CFNet Investing CF (6,347)(6,347)(6,347)(6,347) (4,538)(4,538)(4,538)(4,538) (4,155)(4,155)(4,155)(4,155) (3,885)(3,885)(3,885)(3,885) Current Ratio (x) 0.8 0.6 0.6 0.5 Div Paid (1,885) (1,995) (2,473) (2,810) Quick Ratio (x) 0.8 0.6 0.5 0.5 Chg in Gross Debt (132) 0 0 0 Net Debt/Equity (X) 0.4 0.5 0.5 0.5 Capital Issues 147 0 0 0 Net Debt/Equity ex MI (X) 0.4 0.5 0.5 0.6 Other Financing CF (248) 0 0 0 Capex to Debt (%) 28.0 32.7 29.9 28.0 Net FinNet FinNet FinNet Financing CFancing CFancing CFancing CF (2,118)(2,118)(2,118)(2,118) (1,995)(1,995)(1,995)(1,995) (2,473)(2,473)(2,473)(2,473) (2,810)(2,810)(2,810)(2,810) Z-Score (X) 2.1 2.2 2.2 2.2 Currency Adjustments 26 0 0 0 N. Cash/(Debt)PS (sen) (102.3) (127.7) (135.3) (140.8) Chg in Cash (2,856) (2,179) (653) (471) Opg CFPS (sen) 43.3 64.1 67.8 71.2 Free CFPS (sen) 19.8 (2.1) 21.2 27.3 Quarterly / Interim Income Statement (RM m) Segmental Breakdown / Key Assumptions

FY FY FY FY DecDecDecDec 2Q2Q2Q2Q2014201420142014 3Q3Q3Q3Q2014201420142014 4Q4Q4Q4Q2014201420142014 1Q1Q1Q1Q2015201520152015 FY FY FY FY DecDecDecDec 2014201420142014AAAA 2015201520152015FFFF 2016201620162016FFFF 2017201720172017FFFF

Turnover 4,730 4,653 4,813 4,751 Revenues (RM m) Cost of Goods Sold (2,988) (2,953) (3,046) (3,010) Celcom 7,729 7,595 7,823 8,115 Gross ProfitGross ProfitGross ProfitGross Profit 1,7421,7421,7421,742 1,7001,7001,7001,700 1,7671,7671,7671,767 1,7411,7411,7411,741 XL Axiata 6,475 6,309 6,745 7,015 Other Oper. (Exp)/Inc (1,018) (928) (846) (890) Robi 2,085 2,346 2,491 2,574 Operating ProfitOperating ProfitOperating ProfitOperating Profit 724724724724 772772772772 921921921921 851851851851 Dialog 1,686 1,714 1,785 1,849 Other Non Opg (Exp)/Inc 10 (56) (162) (205) Others 737 588 588 588 Associates & JV Inc 97 70 80 134 TotalTotalTotalTotal 18,71218,71218,71218,712 18,55118,55118,55118,551 19,43219,43219,43219,432 20,14220,14220,14220,142 Net Interest (Exp)/Inc (147) (135) (132) (119) EBITDA (RM m) Exceptional Gain/(Loss) (172) 97 133 29 Celcom 3,329 3,190 3,325 3,489 PrePrePrePre----tax Profittax Profittax Profittax Profit 512512512512 747747747747 840840840840 690690690690 XL Axiata 2,269 2,348 2,528 2,636 Tax (118) (140) (227) (154) Robi 784 856 909 940 Minority Interest 54 24 (19) 49 Dialog 512 545 580 608 Net ProfitNet ProfitNet ProfitNet Profit 448448448448 631631631631 595595595595 585585585585 Others 20 19 11 21 Net profit bef Except. 620 534 462 556 TotalTotalTotalTotal 6,9156,9156,9156,915 6,9586,9586,9586,958 7,3537,3537,3537,353 7,6947,6947,6947,694 EBITDA 1,724 1,730 1,836 1,763 EBITDA Margins (%) Celcom 43.1 42.0 42.5 43.0 Sales Gth (%) 4.8 (1.6) 3.4 (1.3) XL Axiata 35.0 37.2 37.5 37.6 EBITDA Gth (%) (11.0) 0.3 6.1 (3.9) Robi 37.6 36.5 36.5 36.5 Opg Profit Gth (%) (17.7) 6.6 19.4 (7.6) Dialog 30.4 31.8 32.5 32.9 Net Profit Gth (%) (33.6) 40.9 (5.7) (1.7) Others 2.7 3.2 1.9 3.6 Gross Margins (%) 36.8 36.5 36.7 36.7 TotalTotalTotalTotal 37.037.037.037.0 37.537.537.537.5 37.837.837.837.8 38.238.238.238.2 Opg Profit Margins (%) 15.3 16.6 19.1 17.9 Key Assumptions Net Profit Margins (%) 9.5 13.6 12.4 12.3 Celcom revenue growth (%) (3.5) (1.9) 3.0 3.7 Celcom EBITDA margins (%) 43.0 42.0 42.5 43.0 XL revenue growth (%) 8.7 1.1 6.9 4.0 XL EBITDA margins (%) 35.3 37.2 37.5 37.6 Source: Company; AllianceDBS

Industry Focus

Telecommunication

DiGi.Com (HOLD; RM5.61; DIGI MK; Price Target : RM6.00)



Turnover 7,019 7,257 7,598 7,972 Net Fixed Assets 2,382 2,730 2,962 3,130 Cost of Goods Sold (2,099) (2,141) (2,165) (2,272) Invts in Associates & JVs 0 0 0 0 Gross ProfitGross ProfitGross ProfitGross Profit 4,9204,9204,9204,920 5,1165,1165,1165,116 5,4325,4325,4325,432 5,7005,7005,7005,700 Other LT Assets 502 405 306 215 Other Opng (Exp)/Inc (2,248) (2,370) (2,498) (2,644) Cash & ST Invts 519 407 302 303 Operating ProfitOperating ProfitOperating ProfitOperating Profit 2,6712,6712,6712,671 2222,747,747,747,747 2,9342,9342,9342,934 3,0563,0563,0563,056 Inventory 65 73 76 80 Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 744 726 760 797 Associates & JV Inc 0 0 0 0 Other Current Assets 95 95 95 95 Net Interest (Exp)/Inc (26) (36) (40) (42) Total AssetsTotal AssetsTotal AssetsTotal Assets 4,3084,3084,3084,308 4,4354,4354,4354,435 4,5014,5014,5014,501 4,6204,6204,6204,620 Exceptional Gain/(Loss) 0 0 0 0 PrePrePrePre----taxtaxtaxtax ProfitProfitProfitProfit 2,6452,6452,6452,645 2,7102,7102,7102,710 2,8942,8942,8942,894 3,0143,0143,0143,014 ST Debt 804 804 804 804 Tax (614) (678) (724) (754) Creditor 1,844 1,966 2,012 2,111 Minority Interest 0 0 0 0 Other Current Liab 439 445 464 485 Preference Dividend 0 0 0 0 LT Debt 244 244 244 244 Net ProfitNet ProfitNet ProfitNet Profit 2,0312,0312,0312,031 2,0332,0332,0332,033 2,1712,1712,1712,171 2,2612,2612,2612,261 Other LT Liabilities 290 290 290 290 Net Profit before Except. 2,031 2,033 2,171 2,261 Shareholder’s Equity 686 686 686 686 EBITDA 3,163 3,346 3,592 3,769 Minority Interests 0 0 0 0 Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab. 4,3084,3084,3084,308 4,4354,4354,4354,435 4,5014,5014,5014,501 4,6204,6204,6204,620 Sales Gth (%) 4.2 3.4 4.7 4.9 EBITDA Gth (%) 4.0 5.8 7.3 4.9 Non-Cash Wkg. Capital (1,380) (1,518) (1,546) (1,624) Opg Profit Gth (%) 23.4 2.8 6.8 4.2 Net Cash/(Debt) (528) (641) (745) (744) Net Profit Gth (%) 19.1 0.1 6.8 4.2 Effective Tax Rate (%) 23.2 25.0 25.0 25.0 Cash Flow Statement (RM m) Rates & Ratio


Pre-Tax Profit 2,645 2,710 2,894 3,014 Gross Margins (%) 70.1 70.5 71.5 71.5 Dep. & Amort. 492 599 658 713 Opg Profit Margin (%) 38.1 37.8 38.6 38.3 Tax Paid (501) (678) (724) (754) Net Profit Margin (%) 28.9 28.0 28.6 28.4 Assoc. & JV Inc/(loss) 0 0 0 0 ROAE (%) 301.5 296.3 316.3 329.5 Chg in Wkg.Cap. (39) 138 28 79 ROA (%) 50.4 46.5 48.6 49.6 Other Operating CF (63) 0 0 0 ROCE (%) 112.5 101.8 108.7 113.2 Net Operating CFNet Operating CFNet Operating CFNet Operating CF 2,6992,6992,6992,699 2,7702,7702,7702,770 2,8562,8562,8562,856 3,0523,0523,0523,052 Div Payout Ratio (%) 99.5 100.0 100.0 100.0 Capital Exp.(net) (892) (850) (790) (790) Net Interest Cover (x) 103.4 75.9 73.4 73.1 Other Invts.(net) 0 0 0 0 Asset Turnover (x) 1.7 1.7 1.7 1.7 Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 37.5 37.0 35.7 35.6 Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 406.8 451.0 481.5 482.6 Other Investing CF 13 0 0 0 Inventory Turn (avg days) 14.0 16.2 18.0 18.2 Net Investing CFNet Investing CFNet Investing CFNet Investing CF (880)(880)(880)(880) (850)(850)(850)(850) (790)(790)(790)(790) (790)(790)(790)(790) Current Ratio (x) 0.5 0.4 0.4 0.4 Div Paid (2,006) (2,033) (2,171) (2,261) Quick Ratio (x) 0.4 0.4 0.3 0.3 Chg in Gross Debt 295 0 0 0 Net Debt/Equity (X) 0.8 0.9 1.1 1.1 Capital Issues 0 0 0 0 Net Debt/Equity ex MI (X) 0.8 0.9 1.1 1.1 Other Financing CF 0 0 0 0 Capex to Debt (%) 85.2 81.1 75.4 75.4 Net Financing CFNet Financing CFNet Financing CFNet Financing CF (1,711)(1,711)(1,711)(1,711) (2,033)(2,033)(2,033)(2,033) (2,171)(2,171)(2,171)(2,171) (2,261)(2,261)(2,261)(2,261) Z-Score (X) 10.4 10.2 10.2 10.0 Currency Adjustments 0 0 0 0 N. Cash/(Debt)PS (sen) (6.8) (8.2) (9.6) (9.6) Chg in Cash 108 (113) (105) 1 Opg CFPS (sen) 35.2 33.9 36.4 38.2 Free CFPS (sen) 23.2 24.7 26.6 29.1 Quarterly / Interim Income Statement (RM m) Segmental Breakdown / Key Assumptions

FY FY FY FY DDDDecececec 2Q2Q2Q2Q2014201420142014 3Q3Q3Q3Q2014201420142014 4Q4Q4Q4Q2014201420142014 1Q1Q1Q1Q2015201520152015 FY FY FY FY DecDecDecDec 2014201420142014AAAA 2015201520152015FFFF 2016201620162016FFFF 2017201720172017FFFF

Turnover 1,746 1,756 1,799 1,791 Revenues (RM m) Cost of Goods Sold 0 0 0 0 Postpaid voice 787 771 765 759 Gross ProfitGross ProfitGross ProfitGross Profit 0000 0000 0000 0000 Prepaid voice 3,096 3,073 3,133 3,206 Other Oper. (Exp)/Inc (1,066) (1,094) (1,130) (1,156) Data 2,450 2,694 2,944 3,213 Operating ProfitOperating ProfitOperating ProfitOperating Profit 680680680680 662662662662 669669669669 635635635635 Others 686 720 756 794 Other Non Opg (Exp)/Inc 0 0 0 0 Associates & JV Inc 0 0 0 0 TotalTotalTotalTotal 7,0197,0197,0197,019 7,2577,2577,2577,257 7,5987,5987,5987,598 7,9727,9727,9727,972 Net Interest (Exp)/Inc (6) (5) (9) (9) Key Assumptions Exceptional Gain/(Loss) 0 0 0 0 Total subscribers 11,421.0 11,861.0 12,301.0 12,741.0 PrePrePrePre----tax Profittax Profittax Profittax Profit 674674674674 657657657657 660660660660 626626626626 Blended ARPU (RM) 47.4 46.8 47.2 47.8 Tax (175) (170) (100) (147) EBITDA margins (%) 45.1 46.1 47.3 47.3 Minority Interest 0 0 0 0 Capex (RM m) 899.7 850.0 790.0 790.0 Net ProfitNet ProfitNet ProfitNet Profit 499499499499 487487487487 560560560560 479479479479 Net profit bef Except. 499 487 560 479 EBITDA 795 789 801 775 Sales Gth (%) 1.7 0.6 2.4 (0.4) EBITDA Gth (%) 2.1 (0.8) 1.6 (3.3) Opg Profit Gth (%) 3.0 (2.7) 1.1 (5.0) Net Profit Gth (%) 2.8 (2.4) 15.0 (14.4) Gross Margins (%) 100.0 100.0 100.0 100.0 Opg Profit Margins (%) 38.9 37.7 37.2 35.5 Net Profit Margins (%) 28.6 27.7 31.1 26.8 Source: Company; AllianceDBS

Industry Focus

Telecommunication

Maxis (FULLY VALUED; RM6.66; MAXIS MK; Price Target : RM5.80) Income Statement (RM m) Balance Sheet (RM m)


Turnover 8,389 8,571 8,827 9,089 Net Fixed Assets 4,008 4,283 4,409 4,517 Cost of Goods Sold (2,707) (2,553) (2,519) (2,449) Invts in Associates & JVs 0 0 0 0 Gross ProfitGross ProfitGross ProfitGross Profit 5,6825,6825,6825,682 6,0186,0186,0186,018 6,3086,3086,3086,308 6,6406,6406,6406,640 Other LT Assets 11,523 11,383 11,347 11,336 Other Opng (Exp)/Inc (2,681) (2,871) (2,957) (3,045) Cash & ST Invts 1,531 1,231 1,081 853 Operating ProfitOperating ProfitOperating ProfitOperating Profit 3,0013,0013,0013,001 3,1473,1473,1473,147 3,3513,3513,3513,351 3,5953,5953,5953,595 Inventory 12 17 18 18 Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 971 952 981 1,010 Associates & JV Inc 0 0 0 0 Other Current Assets 64 64 64 64 Net Interest (Exp)/Inc (380) (397) (406) (413) Total AssetsTotal AssetsTotal AssetsTotal Assets 18,10918,10918,10918,109 17,93117,93117,93117,931 17,89917,89917,89917,899 17,79817,79817,79817,798 Exceptional Gain/(Loss) (185) 0 0 0 PrePrePrePre----tax Profittax Profittax Profittax Profit 2,4362,4362,4362,436 2222,749,749,749,749 2,9452,9452,9452,945 3,1823,1823,1823,182 ST Debt 880 880 880 880 Tax (711) (715) (766) (796) Creditor 3,002 2,817 2,709 2,625 Minority Interest (7) 0 0 0 Other Current Liab 301 301 301 301 Preference Dividend 0 0 0 0 LT Debt 8,118 8,118 8,118 8,118 Net ProfitNet ProfitNet ProfitNet Profit 1,7181,7181,7181,718 2,0342,0342,0342,034 2,1792,1792,1792,179 2,3872,3872,3872,387 Other LT Liabilities 1,070 1,070 1,070 1,070 Net Profit before Except. 1,903 2,034 2,179 2,387 Shareholder’s Equity 4,716 4,723 4,799 4,783 EBITDA 4,405 4,345 4,493 4,627 Minority Interests 22 22 22 22 Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab. 18,118,118,118,109090909 17,93117,93117,93117,931 17,89917,89917,89917,899 17,79817,79817,79817,798 Sales Gth (%) (7.7) 2.2 3.0 3.0 EBITDA Gth (%) (2.5) (1.4) 3.4 3.0 Non-Cash Wkg. Capital (2,256) (2,085) (1,947) (1,834) Opg Profit Gth (%) (4.7) 4.9 6.5 7.3 Net Cash/(Debt) (7,467) (7,767) (7,917) (8,145) Net Profit Gth (%) (2.7) 18.4 7.1 9.5 Effective Tax Rate (%) 29.2 26.0 26.0 25.0 Cash Flow Statement (RM m) Rates & Ratio


Pre-Tax Profit 2,436 2,749 2,945 3,182 Gross Margins (%) 67.7 70.2 71.5 73.1 Dep. & Amort. 1,404 1,198 1,142 1,031 Opg Profit Margin (%) 35.8 36.7 38.0 39.6 Tax Paid (636) (715) (766) (796) Net Profit Margin (%) 20.5 23.7 24.7 26.3 Assoc. & JV Inc/(loss) 0 0 0 0 ROAE (%) 32.1 43.1 45.8 49.8 Chg in Wkg.Cap. 449 (171) (137) (114) ROA (%) 9.7 11.3 12.2 13.4 Other Operating CF 454 450 450 450 ROCE (%) 14.5 15.7 16.7 18.1 Net Operating CFNet Operating CFNet Operating CFNet Operating CF 4,1074,1074,1074,107 3,5113,5113,5113,511 3,6343,6343,6343,634 3,7543,7543,7543,754 Div Payout Ratio (%) 174.9 99.7 96.5 100.7 Capital Exp.(net) (974) (1,300) (1,200) (1,100) Net Interest Cover (x) 7.9 7.9 8.3 8.7 Other Invts.(net) 0 0 0 0 Asset Turnover (x) 0.5 0.5 0.5 0.5 Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 41.7 41.0 40.0 40.0 Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 761.3 784.0 732.4 686.7 Other Investing CF (258) (33) (31) (29) Inventory Turn (avg days) 11.5 3.9 4.6 4.6 Net Investing CFNet Investing CFNet Investing CFNet Investing CF (1,232)(1,232)(1,232)(1,232) (1,333)(1,333)(1,333)(1,333) (1,231)(1,231)(1,231)(1,231) (1,129)(1,129)(1,129)(1,129) Current Ratio (x) 0.6 0.6 0.6 0.5 Div Paid (3,002) (2,028) (2,103) (2,403) Quick Ratio (x) 0.6 0.5 0.5 0.5 Chg in Gross Debt 1,227 0 0 0 Net Debt/Equity (X) 1.6 1.6 1.6 1.7 Capital Issues 14 0 0 0 Net Debt/Equity ex MI (X) 1.6 1.6 1.6 1.7 Other Financing CF (391) (450) (450) (450) Capex to Debt (%) 10.8 14.4 13.3 12.2 Net Financing CFNet Financing CFNet Financing CFNet Financing CF (2,152)(2,152)(2,152)(2,152) (2,478)(2,478)(2,478)(2,478) (2,553)(2,553)(2,553)(2,553) (2,853)(2,853)(2,853)(2,853) Z-Score (X) 3.5 3.6 3.6 3.7 Currency Adjustments 0 0 0 0 N. Cash/(Debt)PS (sen) (99.4) (103.4) (105.4) (108.5) Chg in Cash 723 (300) (150) (228) Opg CFPS (sen) 48.7 49.0 50.2 51.5 Free CFPS (sen) 41.7 29.4 32.4 35.3 Quarterly / Interim Income Statement (RM m) Segmental Breakdown / Key Assumptions


Turnover 2,082 2,065 2,123 2,149 Revenues (RM m) Cost of Goods Sold (652) (652) (696) (713) Mobile 8,018 8,181 8,418 8,659 Gross ProfitGross ProfitGross ProfitGross Profit 1,4301,4301,4301,430 1,4131,4131,4131,413 1,4271,4271,4271,427 1,4361,4361,4361,436 Enterprise & fixed 252 265 278 292 Other Oper. (Exp)/Inc (705) (669) (827) (750) Home services 119 125 131 138 Operating ProfitOperating ProfitOperating ProfitOperating Profit 725725725725 744744744744 600600600600 686686686686 TotalTotalTotalTotal 8,3898,3898,3898,389 8,5718,5718,5718,571 8,8278,8278,8278,827 9,0899,0899,0899,089 Other Non Opg (Exp)/Inc 29 43 84 43 Key Assumptions Associates & JV Inc 0 0 0 0 Revenue growth (%) (7.7) 2.2 3.0 3.0 Net Interest (Exp)/Inc (91) (101) (98) (96) EBITDA margin (%) 50.3 50.7 50.9 50.9 Exceptional Gain/(Loss) (29) (43) (84) (43) Total subscribers 12,913.0 13,173.0 13,433.0 13,693.0 PrePrePrePre----tax Profittax Profittax Profittax Profit 634634634634 643643643643 502502502502 590590590590 Blended ARPU 48.9 49.3 49.8 50.2 Tax (183) (192) (167) (178) Minority Interest (5) (2) 4 (2) Net ProfitNet ProfitNet ProfitNet Profit 446446446446 449449449449 339339339339 410410410410 Net profit bef Except. 475 492 423 453 EBITDA 1,103 1,115 1,079 1,084 Sales Gth (%) (1.7) (0.8) 2.8 1.2 EBITDA Gth (%) (0.5) 1.1 (3.2) 0.5 Opg Profit Gth (%) (2.9) 2.6 (19.4) 14.3 Net Profit Gth (%) (7.9) 0.7 (24.5) 20.9 Gross Margins (%) 68.7 68.4 67.2 66.8 Opg Profit Margins (%) 34.8 36.0 28.3 31.9 Net Profit Margins (%) 21.4 21.7 16.0 19.1 Source: Company; AllianceDBS

Industry Focus

Telecommunication

Telekom Malaysia (BUY, upgrade from HOLD; RM6.78; TM MK; Price Target : RM7.65)



Turnover 11,235 11,648 12,050 12,472 Net Fixed Assets 14,785 14,682 14,501 14,253 Cost of Goods Sold (7,754) (8,026) (8,254) (8,469) Invts in Associates & JVs 7 7 7 7 Gross ProfitGross ProfitGross ProfitGross Profit 3,4813,4813,4813,481 3,6233,6233,6233,623 3,7963,7963,7963,796 4,0044,0044,0044,004 Other LT Assets 1,350 1,350 1,350 1,350 Other Opng (Exp)/Inc (2,150) (2,163) (2,136) (2,107) Cash & ST Invts 3,455 4,023 4,069 4,190 Operating ProfitOperating ProfitOperating ProfitOperating Profit 1,3311,3311,3311,331 1,4601,4601,4601,460 1,6601,6601,6601,660 1,8961,8961,8961,896 Inventory 116 129 134 139 Other Non Opg (Exp)/Inc (43) 0 0 0 Debtors 2,825 2,588 2,678 2,772 Associates & JV Inc 9 0 0 0 Other Current Assets 85 85 85 85 Net Interest (Exp)/Inc (155) (143) (129) (125) Total AssetsTotal AssetsTotal AssetsTotal Assets 22,62322,62322,62322,623 22,86522,86522,86522,865 22,82322,82322,82322,823 22,79522,79522,79522,795 Exceptional Gain/(Loss) (37) 0 0 0 PrePrePrePre----tax Profittax Profittax Profittax Profit 1,1061,1061,1061,106 1,3171,3171,3171,317 1,5311,5311,5311,531 1,7711,7711,7711,771 ST Debt 197 197 197 197 Tax (263) (329) (383) (443) Creditor 3,605 4,013 4,127 4,234 Minority Interest (11) (23) (17) (20) Other Current Liab 1,055 1,055 1,055 1,055 Preference Dividend 0 0 0 0 LT Debt 6,251 6,251 6,251 6,251 Net ProfitNet ProfitNet ProfitNet Profit 832832832832 964964964964 1,1311,1311,1311,131 1,3081,3081,3081,308 Other LT Liabilities 3,555 3,299 3,043 2,787 Net Profit before Except. 869 964 1,131 1,308 Shareholder’s Equity 7,571 7,668 7,781 7,911 EBITDA 3,672 3,763 3,941 4,144 Minority Interests 389 382 369 359 Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab. 22,62322,62322,62322,623 22,86522,86522,86522,865 22,82322,82322,82322,823 22,79522,79522,79522,795 Sales Gth (%) 5.7 3.7 3.5 3.5 EBITDA Gth (%) 1.4 2.5 4.7 5.1 Non-Cash Wkg. Capital (1,634) (2,265) (2,286) (2,294) Opg Profit Gth (%) (9.0) 9.7 13.7 14.2 Net Cash/(Debt) (2,993) (2,425) (2,379) (2,258) Net Profit Gth (%) (17.8) 15.9 17.3 15.6 Effective Tax Rate (%) 23.8 25.0 25.0 25.0 Cash Flow Statement (RM m) Rates & Ratio


Pre-Tax Profit 1,106 1,317 1,531 1,771 Gross Margins (%) 31.0 31.1 31.5 32.1 Dep. & Amort. 2,341 2,303 2,281 2,248 Opg Profit Margin (%) 11.8 12.5 13.8 15.2 Tax Paid (114) (329) (383) (443) Net Profit Margin (%) 7.4 8.3 9.4 10.5 Assoc. & JV Inc/(loss) (9) 0 0 0 ROAE (%) 11.3 12.7 14.6 16.7 Chg in Wkg.Cap. (86) 631 21 9 ROA (%) 3.8 4.2 5.0 5.7 Other Operating CF (271) (256) (256) (256) ROCE (%) 5.8 6.1 7.0 8.1 Net Operating CFNet Operating CFNet Operating CFNet Operating CF 3,0143,0143,0143,014 3,6663,6663,6663,666 3,1943,1943,1943,194 3,3293,3293,3293,329 Div Payout Ratio (%) 101.8 90.0 90.0 90.0 Capital Exp.(net) (2,010) (2,200) (2,100) (2,000) Net Interest Cover (x) 8.6 10.2 12.8 15.1 Other Invts.(net) 155 0 0 0 Asset Turnover (x) 0.5 0.5 0.5 0.5 Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 83.1 84.8 79.8 79.7 Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 228.5 243.0 248.7 245.3 Other Investing CF (188) 0 0 0 Inventory Turn (avg days) 9.1 7.8 8.0 8.0 Net Investing CFNet Investing CFNet Investing CFNet Investing CF (2,043)(2,043)(2,043)(2,043) (2,200)(2,200)(2,200)(2,200) (2,100)(2,100)(2,100)(2,100) (2,000)(2,000)(2,000)(2,000) Current Ratio (x) 1.3 1.3 1.3 1.3 Div Paid (932) (868) (1,018) (1,177) Quick Ratio (x) 1.3 1.3 1.3 1.3 Chg in Gross Debt (213) 0 0 0 Net Debt/Equity (X) 0.4 0.3 0.3 0.3 Capital Issues 779 0 0 0 Net Debt/Equity ex MI (X) 0.4 0.3 0.3 0.3 Other Financing CF (25) (30) (30) (30) Capex to Debt (%) 31.2 34.1 32.6 31.0 Net Financing CFNet Financing CFNet Financing CFNet Financing CF (391)(391)(391)(391) (898)(898)(898)(898) (1,048)(1,048)(1,048)(1,048) (1,207)(1,207)(1,207)(1,207) Z-Score (X) 2.0 2.1 2.1 2.2 Currency Adjustments 0 0 0 0 N. Cash/(Debt)PS (sen) (80.5) (65.2) (64.0) (60.7) Chg in Cash 580 568 46 121 Opg CFPS (sen) 83.3 81.6 85.3 89.3 Free CFPS (sen) 27.0 39.4 29.4 35.7 Quarterly / Interim Income Statement (RM m) Key Assumptions


Turnover 2,822 2,636 3,157 2,774 Revenue growth (%) 5.7 3.7 3.5 3.5 Cost of Goods Sold 0 0 0 0 EBITDA margin (%) 31.9 31.9 32.3 32.9 Gross ProfitGross ProfitGross ProfitGross Profit 2,8222,8222,8222,822 2,6362,6362,6362,636 3,1573,1573,1573,157 2,7742,7742,7742,774 Capex (RM m) 2,021.1 2,200.0 2,100.0 2,000.0 Other Oper. (Exp)/Inc (2,484) (2,319) (2,830) (2,531) Unifi subscribers ('000) 729.0 809.0 889.0 969.0 Operating ProfitOperating ProfitOperating ProfitOperating Profit 338338338338 317317317317 328328328328 243243243243 Other Non Opg (Exp)/Inc 7 (12) 89 1 Associates & JV Inc 2 1 5 6 Net Interest (Exp)/Inc (37) (41) (36) (35) Exceptional Gain/(Loss) 0 (3) (132) (42) PrePrePrePre----tax Profittax Profittax Profittax Profit 309309309309 263263263263 254254254254 172172172172 Tax (85) (71) (46) (56) Minority Interest (10) (3) 11 13 Net ProfitNet ProfitNet ProfitNet Profit 214214214214 189189189189 218218218218 129129129129 Net profit bef Except. 214 192 350 171 EBITDA 907 877 1,053 854 Sales Gth (%) 7.7 (6.6) 19.8 (12.1) EBITDA Gth (%) 3.7 (3.3) 20.0 (18.9) Opg Profit Gth (%) 6.8 (6.0) 3.2 (25.9) Net Profit Gth (%) 1.7 (11.8) 15.6 (41.0) Gross Margins (%) 100.0 100.0 100.0 100.0 Opg Profit Margins (%) 12.0 12.0 10.4 8.8 Net Profit Margins (%) 7.6 7.2 6.9 4.6 Source: Company; AllianceDBS

Industry Focus

Telecommunication

Time dotCom (BUY; RM6.68; TDC MK; Price Target : RM7.05) Income Statement (RM m) Balance Sheet (RM m)


Turnover 596 668 775 958 Net Fixed Assets 966 1,287 1,424 1,502 Cost of Goods Sold (377) (430) (492) (595) Invts in Associates & JVs 0 0 0 0 Gross ProfitGross ProfitGross ProfitGross Profit 219219219219 238238238238 283283283283 363363363363 Other LT Assets 1,283 859 859 859 Other Opng (Exp)/Inc (75) (89) (107) (116) Cash & ST Invts 318 674 726 834 OperatinOperatinOperatinOperating Profitg Profitg Profitg Profit 144144144144 148148148148 175175175175 247247247247 Inventory 0 0 0 0 Other Non Opg (Exp)/Inc (11) 0 0 0 Debtors 178 191 221 274 Associates & JV Inc 0 0 0 0 Other Current Assets 1 1 2 2 Net Interest (Exp)/Inc 0 1 1 2 Total AssetsTotal AssetsTotal AssetsTotal Assets 2,7452,7452,7452,745 3,0133,0133,0133,013 3,2323,2323,2323,232 3,4713,4713,4713,471 Exceptional Gain/(Loss) 11 274 0 0 PrePrePrePre----tax Profittax Profittax Profittax Profit 179179179179 442442442442 197197197197 270270270270 ST Debt 52 52 52 52 Tax (7) (7) (12) (20) Creditor 218 215 246 297 Minority Interest 2 0 0 0 Other Current Liab 1 1 1 1 Preference Dividend 0 0 0 0 LT Debt 88 238 288 288 Net ProfitNet ProfitNet ProfitNet Profit 174174174174 435435435435 185185185185 250250250250 Other LT Liabilities 28 28 28 28 Net Profit before Except. 163 161 185 250 Shareholder’s Equity 2,357 2,477 2,616 2,804 EBITDA 253 261 309 390 Minority Interests 1 1 1 1 Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab. 2,7452,7452,7452,745 3,0133,0133,0133,013 3,2323,2323,2323,232 3,4713,4713,4713,471 Sales Gth (%) 8.8 12.0 16.0 23.6 EBITDA Gth (%) 12.6 2.9 18.3 26.4 Non-Cash Wkg. Capital (40) (24) (24) (23) Opg Profit Gth (%) 21.9 3.1 18.1 40.8 Net Cash/(Debt) 177 384 386 494 Net Profit Gth (%) (72.9) 150.0 (57.5) 35.5 Effective Tax Rate (%) 3.9 1.7 6.3 7.4 Cash Flow Statement (RM m) Rates & Ratio


Pre-Tax Profit 179 442 197 270 Gross Margins (%) 36.8 35.6 36.5 37.9 Dep. & Amort. 85 94 113 122 Opg Profit Margin (%) 24.1 22.2 22.6 25.8 Tax Paid (5) (7) (12) (20) Net Profit Margin (%) 29.2 65.1 23.8 26.1 Assoc. & JV Inc/(loss) 0 0 0 0 ROAE (%) 8.0 18.0 7.3 9.2 Chg in Wkg.Cap. 21 (17) 0 (1) ROA (%) 6.8 15.1 5.9 7.5 Other Operating CF 11 (305) (38) (40) ROCE (%) 5.9 5.5 5.7 7.4 Net Operating CFNet Operating CFNet Operating CFNet Operating CF 291291291291 207207207207 260260260260 330330330330 Div Payout Ratio (%) 17.6 9.2 25.0 25.0 Capital Exp.(net) (222) (415) (250) (200) Net Interest Cover (x) 1,396.7 NM NM NM Other Invts.(net) 0 0 0 0 Asset Turnover (x) 0.2 0.2 0.2 0.3 Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 102.5 100.7 97.1 94.3 Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 246.6 235.1 221.9 209.8 Other Investing CF 43 455 38 40 Inventory Turn (avg days) N/A N/A N/A N/A Net Investing CFNet Investing CFNet Investing CFNet Investing CF (179)(179)(179)(179) 40404040 (212)(212)(212)(212) (160)(160)(160)(160) Current Ratio (x) 1.8 3.2 3.2 3.2 Div Paid 0 (40) (46) (63) Quick Ratio (x) 1.8 3.2 3.2 3.2 Chg in Gross Debt (33) 150 50 0 Net Debt/Equity (X) CASH CASH CASH CASH Capital Issues 0 0 0 0 Net Debt/Equity ex MI (X) CASH CASH CASH CASH Other Financing CF (1) 0 0 0 Capex to Debt (%) 158.2 143.0 73.5 58.8 Net Financing CFNet Financing CFNet Financing CFNet Financing CF (35)(35)(35)(35) 110110110110 4444 (63)(63)(63)(63) Z-Score (X) 5.6 4.4 3.9 3.9 Currency Adjustments 2 0 0 0 N. Cash/(Debt)PS (sen) 32.4 70.1 70.4 90.2 Chg in Cash 80 357 52 108 Opg CFPS (sen) 49.3 40.9 47.5 60.6 Free CFPS (sen) 12.6 (37.9) 1.9 23.8 Quarterly / Interim Income Statement (RM m) Segmental Breakdown / Key Assumptions


Turnover 156 151 158 172 Revenues (RM m) Cost of Goods Sold (120) (120) (124) (134) Data 457 528 634 815 Gross ProfitGross ProfitGross ProfitGross Profit 36363636 31313131 34343434 37373737 Voice 71 67 64 61 Other Oper. (Exp)/Inc 1 0 8 10 Data centre 65 70 75 79 Operating ProfitOperating ProfitOperating ProfitOperating Profit 37373737 31313131 42424242 47474747 Others 3 3 3 3 Other Non Opg (Exp)/Inc 10 11 10 12 TotalTotalTotalTotal 596596596596 668668668668 775775775775 958958958958 Associates & JV Inc N/A N/A N/A N/A Key Assumptions Net Interest (Exp)/Inc (2) (2) (1) (2) Wholesale segment growth 10.5 17.4 25.1 37.4 Exceptional Gain/(Loss) N/A 11 N/A N/A Enterprise segment growth 4.7 5.7 5.5 5.3 PrePrePrePre----tax Profittax Profittax Profittax Profit 45454545 51515151 51515151 58585858 SME & Consumer segment 29.0 12.0 10.0 8.0 Tax (2) (2) (1) (2) Minority Interest 0 0 1 1 Net ProfitNet ProfitNet ProfitNet Profit 44444444 50505050 51515151 57575757 Net profit bef Except. 44 39 51 57 EBITDA 69 63 74 81 Sales Gth (%) 18.1 (3.3) 4.9 8.6 EBITDA Gth (%) 26.9 (7.6) 17.3 9.4 Opg Profit Gth (%) 63.4 (14.8) 34.2 12.0 Net Profit Gth (%) 49.5 13.7 1.1 12.0 Gross Margins (%) 23.1 20.6 21.6 21.7 Opg Profit Margins (%) 23.7 20.8 26.6 27.4 Net Profit Margins (%) 28.2 33.2 32.0 33.0 Source: Company; AllianceDBS

Industry Focus

Telecommunication

AllianceDBS recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUYSTRONG BUYSTRONG BUYSTRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY BUY BUY BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLDHOLDHOLDHOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUEDFULLY VALUEDFULLY VALUEDFULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL SELL SELL SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER This report is prepared by AllianceDBS Research Sdn Bhd (“ADBSR”), a subsidiary of Alliance Investment Bank Berhad (“AIBB”) and an associate of DBS Vickers Securities Holdings Pte Ltd (“DBSVH”). This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of ADBSR. The research set out in this report is based on information obtained from sources believed to be reliable and ADBSR, its holding company AIBB, their respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “Alliance Bank Group”) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The Alliance Bank Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The Alliance Bank Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The Alliance Bank Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other banking services for these companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the Alliance Bank Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months.

ANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

COMPANYCOMPANYCOMPANYCOMPANY----SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES

1.1.1.1. DBS Bank Ltd., DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 9 Jun 2015.

PT. DBS Vickers Securities Indonesia ("DBSVI") has a proprietary position in Indosat recommended in this report as of 10 Jun 2015.

2.2.2.2. DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may beneficially own a total of 1% of any class of common equity securities of the company mentioned as of 11 Jun 2015.

Industry Focus

Telecommunication

3.3.3.3.

Compensation for investment banking services:Compensation for investment banking services:Compensation for investment banking services:Compensation for investment banking services:

DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from the Indosat.

DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON RESTRICTIONS ON RESTRICTIONS ON RESTRICTIONS ON DISTRIBUTIONDISTRIBUTIONDISTRIBUTIONDISTRIBUTION

GeneralGeneralGeneralGeneral This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

AustraliaAustraliaAustraliaAustralia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong KongHong KongHong KongHong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

IndonesiaIndonesiaIndonesiaIndonesia This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

MalaysiaMalaysiaMalaysiaMalaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

SingaporeSingaporeSingaporeSingapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

ThailandThailandThailandThailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United United United United KingdomKingdomKingdomKingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

DubaiDubaiDubaiDubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United StatesUnited StatesUnited StatesUnited States Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. It is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other Other Other Other jurisdictionsjurisdictionsjurisdictionsjurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

AllianceDBS Research Sdn BhdAllianceDBS Research Sdn BhdAllianceDBS Research Sdn BhdAllianceDBS Research Sdn Bhd (128540 U) 19th Floor, Menara Multi-Purpose, Capital Square,

8 Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia.

Tel.: +603 2604 3333 Fax: +603 2604 3921 email : [email protected]

malaysia industry focus telecommunication...maxis started to offer competitive rates for idd again,...

Documents