Telekom Malaysia remains as top pick for CIMB Research

KUALA LUMPUR: CIMB Research remains Neutral on the mobile telecommunications sector, and said it rmained cautious on DiGi.Com Bhd given that the migrant market contributes to a hefty 20% of its revenue. Maxis has said it will not let up until it captures its fair share of the market.
"Telekom Malaysia is our top pick as it is largely spared from the tussle in the mobile space," said CIMB Research.
The
research unit pointed out that DiGi cut its IDD rates in mid-April
including that to the key migrant countries by up to 77%, but left SMS
rates to these destinations unchanged. However, its rates are still
higher than that of Maxis for calls to China, Indonesia, Myanmar and
Nepal.
CIMB Research opined that Maxis's rate cut earlier this
year is beginning to bite into DiGi's market, and the latter had to
respond to protect its share.
"DiGi had earlier brushed off
Maxis's threat by saying that there is no need to respond. We believe
Maxis will continue to aggressively address the large and growing
migrant market as part of its strategy to recoup the slide in voice
market share. This market contributes to an estimated 5% of Maxis's
revenue."
CIMB Research said in its view, there could be a small
impact on Celcom, as the IDD segment contributes to about 9% of its
revenue.
"We believe there is still some price elasticity left
in this price-sensitive migrant market, and the price cut will spur
greater usage. But margins will be squeezed." CIMB Research said it
continued to avoid DiGi (Underperform) given that the IDD segment,
which contributes to a hefty 20% of its revenue, is vulnerable to
competition.
Maxis remained a Neutral, thanks to its attractive dividend yields.
Telekom
is largely unaffected by the price war in the IDD space and remains as
CIMB Research's top pick given its strong growth.