UOB Kay Hian
Report Date: Tuesday, 2 September 2025
Telekom Malaysia Bhd 2Q25 Results: A Deep Dive Into Earnings, Outlook, and Strategic Moves
Overview: Solid Core Profits Amid Revenue Headwinds
Telekom Malaysia Bhd (TM), Malaysia’s prominent integrated communications provider, delivered a robust set of core earnings for 2Q25, meeting both analyst and consensus expectations. However, revenue faced headwinds due to a softer performance in TM Global and Unifi segments. Despite these challenges, effective cost management and operational discipline enabled TM to post healthy net profits and maintain an attractive dividend yield, while also laying out a strong strategic roadmap for the remainder of 2025.
Key Stock Information & Shareholder Structure
- Share Price: RM7.02
- Target Price: RM7.00 (DCF-based; maintained HOLD recommendation)
- Market Cap: RM26,940.9 million (~US\$6.38 billion)
- Major Shareholders: Employees Provident Fund (21.5%), Khazanah Nasional Bhd (20.1%), Kumpulan Wang Persaraan (10.2%)
- Dividend Yield (FY25F): 4.7%
Financial Highlights: 2Q25 Performance in Focus
| Metric |
2Q25 |
1Q25 |
2Q24 |
YoY Change |
QoQ Change |
| Revenue (RM mil) |
2,771.9 |
2,851.5 |
2,908.2 |
-4.7% |
-2.8% |
| Core Net Profit (RM mil) |
438.1 |
393.0 |
398.0 |
+10.1% |
+11.4% |
| EBITDA Margin (%) |
41.4 |
37.8 |
38.8 |
+2.6ppt |
+3.6ppt |
| Core Net Margin (%) |
15.8 |
13.8 |
13.7 |
+2.1ppt |
+2.0ppt |
Dividend and Balance Sheet Strength
- Interim Dividend: 12.5 sen/share (consistent with 1H24)
- Projected Total Dividend FY25: 31.4 sen/share (70% payout ratio)
- Net Debt/EBITDA: 0.66x as of 1H25, underlining prudent leverage and a healthy balance sheet
Segmental Performance: Unifi, TM One, and TM Global
Unifi: Marginal Revenue Dip Amid ARPU Pressure
- 2Q25 revenue at RM1,377m (-1% YoY, -1% QoQ)
- Net adds: 3,000 new customers in 1Q25, totaling 3.2 million subscribers
- ARPU: Down 2% QoQ to RM125/month (from RM127 in 1Q25, RM134 in 4Q24)
- Key factors: Aggressive bundling campaigns and higher uptake of entry-level plans
TM One: Cloud and Digital Solutions Gain Momentum
- 2Q25 revenue: RM671m (-9% YoY, stable QoQ)
- YoY decline due to a one-off arbitration settlement recognized in 2Q24
- Continued growth in cloud, ICT, and digital solutions; momentum expected to build in 2H25 with major projects in the pipeline
TM Global: Short-Term Weakness, Long-Term Pipeline Robust
- 2Q25 revenue: Down 8% YoY and 9% QoQ
- Causes: Lower global voice traffic, slowdown in managed services, and a drop in IRU lease revenue
- Outlook: Strong pipeline for 2H25, driven by cross-border bandwidth demand, data center expansion, and 5G mobile backhaul services
Financial Performance by Segment
| Segment |
2Q24 |
3Q24 |
4Q24 |
1Q25 |
2Q25 |
| Unifi |
47.7% |
47.9% |
47.7% |
48.6% |
49.7% |
| TM One |
25.5% |
24.4% |
25.6% |
23.5% |
24.2% |
| TM Global |
25.8% |
27.0% |
25.6% |
26.7% |
25.1% |
| Others |
1.0% |
0.8% |
1.1% |
1.2% |
1.1% |
Key Financials & Ratios: Multi-Year View
| Year End Dec (RM mil) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net turnover |
11,690.2 |
11,712.4 |
12,525.4 |
13,015.7 |
13,532.8 |
| EBITDA |
4,502.0 |
4,474.0 |
4,641.4 |
4,769.4 |
4,905.6 |
| Operating Profit |
1,706.3 |
2,324.6 |
2,484.3 |
2,645.3 |
2,818.3 |
| Net Profit (adj.) |
1,801.1 |
1,728.4 |
1,705.7 |
1,789.0 |
1,911.9 |
| EPS (sen) |
46.9 |
45.0 |
44.4 |
46.6 |
49.8 |
| Dividend Yield (%) |
2.9 |
4.4 |
4.7 |
5.0 |
5.3 |
| Net Margin (%) |
13.3 |
13.2 |
13.8 |
13.9 |
14.1 |
| ROE (%) |
19.7 |
17.1 |
16.1 |
16.0 |
16.3 |
Operational & Strategic Highlights
- Cost Discipline: Manpower optimization and prudent cost control contributed to improved EBITDA margin (up 4ppt QoQ to 41%)
- 5G Backhaul Growth: RM2.4 billion, 10-year contract signed with UMobile for 5G mobile backhaul services, expected to contribute 2% to annual revenue and 1% to net profit
- Data Centre Expansion: JV with Singapore Telecommunications for a 64MW data centre, expected to be operational in 2026. “Blue-sky” scenario (200MW capacity) could lift fair value to RM7.80, but only by 2030
ESG Initiatives: Environmental, Social, and Governance Progress
- Environmental: Achieved a 30% reduction in carbon emissions from the 2019 baseline by 2024, via energy efficiency and renewable adoption
- Social: Nearly RM1.2 million contributed to humanitarian relief, supporting over 25,000 people nationwide
- Governance: Strong transparency, anti-bribery and anti-corruption policies, and vendor integrity screening via MACC’s e-system
Valuation, Recommendation, and Risks
- Rating: HOLD maintained with a DCF-based target price of RM7.00
- Upside: -0.3% from current market price
- Valuation includes: 64MW JV data centre; blue-sky scenario (200MW DC in 2030) raises fair value to RM7.80
- Key Risk: Macroeconomic recession could dampen TM One’s corporate sales and create receivables risk
Performance Guidance for 2025
- Revenue and EBITDA margin guidance remains on track, supported by high-margin service growth and cost discipline
- TM remains committed to delivering positive operating leverage and maintaining a healthy financial position
Conclusion: Stable Core, Strategic Growth, and Prudent Financial Management
Telekom Malaysia’s 2Q25 results underscore its ability to deliver core earnings resilience even amid revenue softness. The group’s focus on cost optimization, diversification into high-growth digital solutions, and strategic partnerships (notably in 5G and data centers) position it well for long-term value creation. While growth headwinds persist in the short-term, TM’s robust balance sheet, attractive dividend yield, and proactive ESG agenda offer confidence for shareholders and potential investors. The HOLD recommendation reflects balanced prospects and valuation at current levels—investors should watch for execution on major digital infrastructure projects and corporate pipeline acceleration in the coming quarters.
