Analysts are generally neutral on TM securing the concession to develop and operate NG999.
PETALING JAYA: The RM1.25bil contract secured by Telekom Malaysia Bhd
(TM) from the government to implement the Next Generation Emergency Services 999 (NG999) emergency handling communications system will have a minimal impact on the group’s earnings.
Analysts are generally neutral on TM securing the concession to develop and operate NG999, which will run until 2036 and replace the existing MERS999 system.
NG999 is set to integrate web-based digital maps, caller IDs, geolocation services, mobile smart apps, data analytics and artificial intelligence (AI) to handle calls to emergency services.
Kenanga Research said based on its estimates, the contract will contribute 0.3% and 1.4% to TM’s financial year 2024 (FY24F) and FY25F earnings, respectively.
The research firm is keeping the stock’s target price at RM7.53 with an “outperform” call.
Explaining its investment case, Kenanga said it likes TM‘s move towards secular data growth on the back of current trends such as digital transformation, proliferation of the Internet of things and cloud-based applications powered by AI.
The group is also benefiting from the roll-out and monetisation opportunities from the second phase of the Jendela National Digital Network.
Aside from this, TM will benefit from new data centres and higher demand for data transmission via its network of digital infrastructure, which includes submarine cables and landings, as well as fibre optics backhaul network.
NG999 is a strategic digital platform for the public to access emergency services offered by five key emergency agencies nationwide, which include the police, the Health Ministry, the Fire and Rescue Department, the Maritime Enforcement Agency and the Civil Defence Force.
The concession will start this year and is valued at RM1.3bil or RM104.2mil per year, according to TA Research.
The research house said it believes TM will be able to run the concession effectively, given that it has a proven track record and vast experience with the previous MERS999 system.
Due to the minimal earnings impact, TA Research is maintaining its FY24 to FY26 earnings forecasts for TM.
“Also there is no change to our target price of RM7.70, based on discounted cash flow valuation with a weighted average cost of capital of 8.5% and long-term growth rate of 2%.
“We reiterate a ‘buy’ call on the stock,” the research house said.
