Telcos shares under pressure

RAM Ratings, in a commentary on the sector, however, said profitability and margins were anticipated to remain flattish among players. It also said data consumption would continue to register strong growth.

KUALA LUMPUR: Shares of telecommunications services providers were under pressure falling by up to 1.4% at midday on tougher operating environment as government introduced new regulatory control for prepaid segment.

Maxis Bhd, Axiata Group Bhd, Digi.Com Bhd and Telekom Malaysia dominated Bursa Malaysia losers’ list in early trade.

Maxis fell 0.8% to RM5.85. It is currently trading at 21.1 times trailing 12-month earnings per share and 23 times its estimates for the coming year. Year-to-date, the counter has fallen some 2.1%. Maxis is expected to announce its third quarter results on Oct 19, 2017.

Axiata eased 0.6%, or three sen to RM5.29. In the past month, Axiata rose 3.3% and is currently trading at 80 times trailing 12-month earnings per share. 

Digi fell seven sen , or 1.41% to RM4.91. Digi trades at 24.8 times trailing 12-month earnings per share and 25 times its estimates for next year. The counter has gained about 0.4% in the past month. 

Kenanga Research has maintained its “neutral” view on the telecommunication sector. Effective Jan 1, 2018, more documents would be needed for new prepaid SIM registration and top-up.

“While we welcome the government’s initiatives, the new rulings could potentially lead to tougher operating environment over the short-term. All in, we made no changes to our telcos’ FY17-18 earnings estimates and their respective target prices,” Kenanga said. 

The research house continued to favour fixed-line over the mobile names under the current challenging times given that the latter’s earnings are set to be affected by the heightened competition and potential change in landscape post the spectrum re-farming exercise.

“Telekom Malaysia (Market perform, target price: RM6.70) remains as our favourite pick for big cap space while OCK (Target price: RM1.05) is maintained as our preferred choice under the mid-cap telecom space,” it added.