Key take away from Maybank Investment Bank on TELCOs RESEARCH TALK 25/6/2013

Summary 
~ Telcos stock had not been doing well this year (at least for now)
~ Low EBITDA growth
~ Regional Telcos stocks are dropping from the peak on May 2013
~ The bond yield had rose recently, which going to attract funds flowing to bond rather than telcos stock
~ ARPU is trending down!
  
Telcos stocks are not exactly defensive for now:
   - 2012 rally was due to liquidity rather than fundamentals.
   - current  valuations are substantially above the previous years mean
   - Industry development (such as LTE deployment) taking a back seat
   - Potentialy prone to profit taking

Analysis
Market Share for Prepaid
 ~ Maxis is trying to address their prepaid subscriber share
 ~ Celcom showing success at competing outsider price
 ~ Digi had a poor 1Q13
Winner for this segment is Celcom a.k.a AXIATA

Market Share for Postpaid
 ~ ARPU for 1Q is seasonally lower
 ~ Steady operating trend for all Telcos

Views on Stocks
AXIATA (Hold, TP: RM6.55, P/E:20.47, EPS: RM0.32)
~ Eperiencing substantial margin compression in 1Q2013 mainly due to XL in Indonesia
~ Challenge lies in raising XL's utilisation amid a still very competitive landscape
~ Implied valuation of celcom is very high!
~ Regarding the Tower REITs, its unlikely to go through as the analyst thinks that Axiata still loaded and don't need money and this REITs still hard to create value for AXIATA
 
p/s: Personally thinks that Axiata might do the Tower REITs if they win the license of operating in Myanmar coz they need to invest heavily, but I think the chances of winning is low as we don't have any other prominent partner for the bidding 


DIGI (Hold, TP:RM4.85, P/E:20.9, EPS:RM0.22)
~ The business trust is still ongoing and should be completed by end of 2013
~ The management needs to address subscriber loss
~ Earnings trending up with the normalisation of depreciation
~ Don't think they will give good dividend as they have already stressed up their retain earning, and that's the reason why they wanna create a Business trust, so that they can distribute their Free cash Flow that generate from operations.

Maxis (Hold, TP:RM7.20, P/E:24.8, EPS:RM0.27)
~ Dividends in Excess of FCF!!!
~ Market might attracted due to high div
~ Restructuring, Saw 8 business units streamlined into 4. Might be more efficient.

Telekom Malaysia (Hold,TP:RM5.30, P/E:24.8, EPS:RM0.22)
~ Competition is heating up on HSBB and IPTV, this was due to the new launch of Maxis-Astro IPTV service in early May 2013 (10,000 bookings withing a week)
~ UNIFI remain a small revenue contributor to TM(11%) and it has been a major source of revenue growth
~ FCF decline after exhausting the goverment grant

Other than those big Telcos, there are some questions regarding small Telcos are being asked and lets see what the analyst had said.

Time Dot Com 
~ Their biz is like telecome just that they don't have voice data.
~ Its trading below its Piers
~ Should have 10-20% upside

Redtone
~ There are numbers of catalyst such as :
   > Tendering for DTTB 
   > The new SHH like Vincent Tan and the Sultan
   > Sharing Spectrum with big telcos (Loryau forgotten whether is Maxis or Celcom d) 
~ As a result, he think there will be a spike in profit, but the analyst thinks that the price had been reflected hence not much upside.

Loryau thoughts:
~ The analyst is feeling that the industry is a bit overvalued (Well supported by the Syariah Funds)
~ The rose of the bond yield gonna attract some funds to go away
~ The Telcos is not spending much on CAPEX which means tower builder and hardware supplier such as OCK and INSTACO wouldn't have much project to do, hence no surprise in profit.
~ In short, AVOID FRESH BUYING in this INDUSTRY NOW. Hold it if you bought at low level but definitely not a good time to buy now!


Disclaimer: No information should be concluded as buy or sell, please consult your personal remisier for your personal investment decision.