Malaysia’s Leading Next Generation Communications Provider ... · (excluding TMI Group and CelcomGroup) ... best estimates and assumptions when taken as a whole to be reasonable
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Malaysia’s Leading Next Generation Communications Malaysia’s Leading Next Generation Communications Provider and Broadband ChampionProvider and Broadband Championpp
TM 1Q 2008 ResultsTM 1Q 2008 Results(excluding TMI Group and Celcom Group)
This presentation is not and does not constitute an offer, invitation, solicitation or recommendation to subscribe for, or purchase, any securities and neither this presentation nor anything contained in it shall form the basis of, or be relied on in connection with any contract or commitment or investment decision.
This presentation has been prepared solely for use at this presentation. By your continued attendance at this presentation, you are deemed to have agreed and confirmed to TelekomMalaysia Berhad (the “Company”) that: (a) you agree not to trade in any securities of the Company or its respective affiliates untiland confirmed to Telekom Malaysia Berhad (the Company ) that: (a) you agree not to trade in any securities of the Company or its respective affiliates until the public disclosure of the information contained herein; and (b) you agree to maintain absolute confidentiality regarding the information disclosed in this presentation until the public disclosure of such information, or unless you have been otherwise notified by the Company.
Reliance should not be placed on the information or opinions contained in this presentation or on its completeness. This presentation does not take into consideration the investment objectives, financial situation or particular needs of any particular investor.
No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions andNo representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. None of the Company and its affiliates and related bodies corporate, and their respective officers, directors, employees and agents disclaim any liability (including, without limitation, any liability arising from fault or negligence) for any loss arising from any use of this presentation or its contents or otherwise arising in connection with it.
This presentation contains projections and “forward‐looking statements” relating to the Company’s business and the sectors in which the Company operates. These forward‐looking statements include statements relating to the Company’s performance. These statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. It is important to note that actual results could differ materially from those anticipated in these forward looking statements. The Company does not undertake to inform you of any matters or information which may come to light or be brought to the Company’s attention after the date hereof.
The forecasts and other forward‐looking statements set out in this presentation are based on a number of estimates and assumptions that are subject to business, economic and competitive uncertainties and contingencies, with respect to future business decisions, which are subject to change and in many cases outside the control of the Company The directors and officers of the Company believe that they have prepared the forecasts with due care andcases outside the control of the Company. The directors and officers of the Company believe that they have prepared the forecasts with due care and attention and consider all best estimates and assumptions when taken as a whole to be reasonable at the time of preparing the presentation. However, the Company’s forecasts presented in this presentation may vary from actual financial results, and these variations may be material and, accordingly, neither the Company nor its directors or officers can give any assurance that the forecast performance in the forecasts or any forward‐looking statement contained in this presentation will be achieved. Details of the forecasts and the assumptions on which they are based are set out in the presentation.
This presentation may not be copied or otherwise reproduced without the written consent of the Company.
Telekom Malaysia Berhad (TM) successfully completed the demerger exercise on 25
Introduction
Telekom Malaysia Berhad (TM) successfully completed the demerger exercise on 25 April 2008, creating two entities – TM and TMI
TM aspires to be Malaysia’s broadband and fixed line leader, having a strong domestic operations with international presence
Market we operate in is expected to grow, despite decline in domestic voice market, with growth primarily driven by domestic broadband and data services, plus other fixed‐line opportunities globally
Currently, Management is enhancing focus on key value creation elements
Continue efforts on maintaining revenue growth momentum
Enhancing focus on identified area of challenges on cost and capital i i imanagement improvement opportunities
As we define and build up ‘new TM’ we shall make customer centricity and operational excellence a priority
Key messages
The 1Q 2008 results showed continued sales growth momentum, up 2.4%vs 1Q last yeary
The overall revenue growth was sustained by Retail success in growing theSME and consumer segments with broadband services
Lower EBITDA was mainly due to one‐off items namely VOIP bad debts andESOS but Normalised EBITDA remains in the 40s. We are committed tofurther enhance Cost and Capital Management efforts
High Speed Broadband (HSBB) network will be the future growth engine forh i d TM d h i d b fi di lthe nation and TM and the industry are set to benefit directly
1
1Q 2008 : Revenue continues its growth momentum whilst Normalised EBITDA is in line with FY2007 margin of 41%Normalised EBITDA is in line with FY2007 margin of 41%
R t d N li dReported NormalisedRM million
1Q08 1Q071 Growth 1Q08 1Q071 Growth
Revenue 2,005.9 1,958.8 2,033.0 1,958.8
EBITDA* 611.5 948.6 832.7 880.7
EBITDA margin** 30 5% 48 4% 41 0% 45 0%
‐35.5%
+2.4%
17 9
+3.8%
4 0
‐5.4%
EBITDA margin** 30.5% 48.4% 41.0% 45.0%
Profit Before Tax 109.3 314.6 331.5 279.9
PBT margin 5.5% 16.1% 16.3% 14.3%
‐65.3%
‐10.7pp
‐17.9pp ‐4.0pp
+18.4%
+2 0ppg 16.3% 14.3%
PATAMI 114.4 246.2 253.3 115.9
N t
‐53.5%
+2.0pp
+118.6%
Note: * FX gain/loss related to borrowings is now reclassified under finance cost** The FY2007 actual EBITDA margin was 41.1%.
1 Lower spending in 1Q07 mainly due to familiarities in SAP
1
1Q 2008 : EBITDA affected by one‐off items with Normalised EBITDA margin still in the 40sNormalised EBITDA margin still in the 40s
In RM million 1Q 2008 1Q 2007
Reported EBITDA 611.5 948.6
Bad Debts Net of Recovery 85.8 ‐
ESOS 60.6 ‐
Diminution / (appreciation ) in value of investment 47.7 (21.9)
Revenue adjustment due to dispute 27.1 ‐
Gain on Disposal of Building ‐ (46.0)
Normalised EBITDA 832.7 880.7
Normalised EBITDA Margin 41.0% 45.0%
2
1Q 2008 : PATAMI affected by higher bad debt and ESOS cost
In RM million 1Q 2008 1Q 2007
Reported Profit After Tax & MI 114.4 246.2
Bad Debts Net of Recovery 63 4 ‐Bad Debts Net of Recovery 63.4
ESOS 60.4 ‐
Diminution / (appreciation ) in value of investment 47.7 (21.9)
Fixed assets write‐off ‐ 33.2
Revenue adjustment due to dispute 20.1 ‐
Gain on Disposal of building ‐ (44.0)
Forex gain on foreign loans (118.8) (97.6)
Finance Costs 66.1 ‐
Normalised Profit After Tax & MI 253.3 115.9
3
Revenue 1Q 2008 : All key line of businesses continue to show growthto s o g o t
Total Revenue
2,500
2,0061
In RM million
1 9591
159 195
165 172
192 136
1,500
2,000
Others
,1,9591
1,553 1,613
1,000
, Others
Global
Wholesale
Retail
‐
500
1Q 2007 1Q 2008
Note:1 Total Revenue is after inter‐co elimination* Revenue of segment is before inter‐co elimination
4
Retail 1Q 2008 : Broadband and Data as main drivers of gro th hilst oice sho s a slo er decline
Retail Revenue By Products
growth whilst voice shows a slower decline
1,800
1 5531,613
Retail Revenue By Products
Points to highlight
• Broadband recorded 55%
In RM million
163
266 334
142 176
1,200
1,400
1,600
Others
1,553increase in customers to 1.4 million from 0.9 million in 1Q 2007
982
163 175
600
800
1,000 Internet & MultimediaData and Leased
• Aggressive promotional packages were carried out to retain fixed line voice and internet revenue in 982 928
0
200
400Voiceand internet revenue in
addition to generate new sales
• Data continues to improve1Q 2007 1Q2008
• Data continues to improve Q on Q
5
Retail – Physical Highlights
Points to highlight
• Strong growth in Broadband ti
Broadband Customer Growth
1,500
In thousand
continues
• Business customers showed improvement in 1Q 2008 to 1 5 illi f 1 49 illi i 300
600
900
1,200
1.5 million from 1.49 million in 4Q 2007
• Aggressive promotional k
Fixed Customer StableCustomers
million
-
300
Mar
'05
Jun
'05
Sep
'05
Dec
'05
Mar
'06
Jun
'06
Sep
'06
Dec
'06
Mar
'07
Jun
'07
Sep
'07
Dec
'07
Mar
'08
Broadband Customerspackages
ARPU (RM) 1Q 2007 4Q 2007 1Q 2008Business* 117 121 103R id ti l* 35 33 32
Wholesale 1Q 2008 – Revenue continues to grow in line with industry demand particularly in Data and y p yLeased services
Wholesale Revenue By Products
In RM million
21200
250
Infra sharing/ co‐159
195
7797
12
100
150
g/location
Data and Leased
70 77
0
50Voice
0
1Q 2007 1Q2008
7
Global 1Q 2008 – Potential area of growth but international VOIP business presents higher risk
Global Revenue By Products
international VOIP business presents higher risk
200
165 172
Points to highlight
• Data showed a faster growth rate as
In RM million
41 68
42
140
160
180
Others
165 172gcompared to 1Q 2007
• More stringent customer screening
80
100
120Data and Bandwith
Voice
gprocess and credit control
120102
20
40
60Voice
0
1Q 2007 1Q2008
8
1Q 2008 : Cost as a % of revenue – Most cost items remain consistent except for direct and operating cost, particularly bad d bdebt provision
Points to highlight
5.0% Supplies & Materials
g g
• Higher Manpower cost due to ESOS (RM 60mn)
• Higher other operating cost
RM 1,754 mn89.6%
RM 1,933 mn96.4%
17 8% 19.9%
17.2%20.3%
4.8% Manpower
Direct Costs
Other Operating Costs
Depreciation
Higher other operating cost due to bad debt and diminution in value of investments
L d i i d
16.3%26.5%
17.8% Depreciation• Lower depreciation due to :
disposal of buildings under sale and lease back arrangement.
33.5%24.7%
g
higher depreciation in 1Q 2007 arising from migration to SAP which
b tl tifi d1Q 2007 1Q 2008
was subsequently ratified in the following quarter
9
Group Capital Expenditure
400
lli db d
In RM million
1032
300
350 336Fuelling Broadband Growth Potential
• Ramping‐up Broadband
17511
8200
250
Others
Support System
196
related infrastructure
• Focus on improving quality and Broadband
116
11
100
150Access
Core Network
offerings
• Lower 1Q 2007 was due to SAP familiarization
61
118
0
50
1Q 2007 1Q 2008
10
TM 1Q 2008 – Proforma Balance SheetRM Million
As at 31Dec 2007As at 31 Mac 2008 • Special dividend of 65 sen
10,025.7
172.9
8,018.7
Shareholders’ Funds
Minority Interests
Deferred & Long Term Liabilities
10,279.2
183.7
7,746.9
less 26% tax (RM 1.65 bn) was paid on 31 Jan 2008
• Loan repayment of RM 248 mn
6,587.4
18,217.3
11,141.8
Long Term Borrowings
Current Assets
6,475.2
18,209.8
8,937.3
248 mn
11,141.8
2,172.9
5,646.7
243.9
Cash & Bank Balances
Current Liabilities
Short Term Borrowings
,
1,173.5
3,274.9
29.2
5,495.1
2.3
11,821.5
Net Current (Liabilities) / Assets
Intangible Assets
Property Plant & Equipment
5,662.4
2.3
11,655.8
898.4
18,217.3
Other Non‐current Assets 889.3
18,209.8
31 Mac 08 31 Dec 07 31 Mac 08 31 Dec 0731 Mac 08 31 Dec 07 31 Mac 08 31 Dec 07Return on Capital Employed 5.94% 4.47% Debt to EBITDA 2.03 2.19Return on Equity 5.71% 6.87% Net Debt/ Equity 0.13 0.06Return on Assets 2.85% 3.27% Net Assets/Share (sen) 292.5 296.5Current Ratio 2.73 1.97 EPS (sen) 16.9 22.2Current Ratio 2.73 1.97 EPS (sen) 16.9 22.2
11
HSBB Updates
HSBB is an integral part of the Government’s aspiration for greater national knowledge, development
in RM billion Phase 1 Total
Total project cost 11.3 15.2
Government co-investment 2.4 4.8and competitiveness
HSBB enables TM to become a regional IP hub and Malaysia’s l di t ti
TM investment 8.9 10.4
Coverage area Inner KlangValley, Iskandar
Malaysia (IM) and
Klang Valley, Penang, South Johor IM andleading next generation
communications provider
h h
Malaysia (IM) and industrial areas
nationwide
Johor, IM, and state capitals
industrial areas nationwide
The HSBB Phase I
Total investment of up to RM 11.3 billion with TM investing RM 8.9 billion over the next 10 years
Premises passed (no. of premises)
1.3 million 2.2 million
billion over the next 10 years
Government will be co‐investing RM 2.4 billion over a period of 3 years
G t d TM t dGovernment and TM are expected to finalise the details of the PPP Agreement in June 2008
12
Broadband Cost and Capital Management
Key Takeaways
• Register healthy growth in SME and Consumer segment
• Government and private sectors promoting ICT
• More stringent customer screening process with tighter credit control. Intensify collection and recovery process
• Collection and reducing receivables is one of our key p p gbased transaction will continue to boost demand KPI for our sales team
• Accelerate efforts to address operational efficiencies in order to manage cost
• Continue monetization initiatives on non‐core assets
• Will remain as one of our main priorities
Customer Service
• Committed to customers in offering creativity and innovation inour product and services
• Continue to improve service delivery at our distribution & retail outletsas well as contact centre outlets
HSBB Dividend Policy
• Geared to implement HSBB network for the next 10 • Continue to enhance shareholders’ value pyears
• Important engine for national growth and TM is set to benefit
• Dividend policy of minimum RM 700 million or 90% of PATAMI ,whichever higher
• With net dividend of RM 700 million at RM 3.30* per share, the net dividend yield is 5.9%, y