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Asia300

Telekom Malaysia's 3Q net profit jumps 32.5% on forex gains

Analysts doubt company's ability to meet revenue growth target

A logo display of Telekom Malaysia at its office in Cyberjaya outside Kuala Lumpur   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Telekom Malaysia Wednesday reported a 32.5% jump in its third quarter net profit buoyed by currency gain, but analysts warned the state-run fixed-line telecommunications company could miss its annual revenue growth target.

Net profit for the three months ended Sep. 30 totalled 211.82 million ringgit ($51.37 million), rising from 159.84 million ringgit a year ago, according to an exchange filing. The company booked a 27 million ringgit foreign exchange gain on borrowings, it said. Quarterly revenue edged 0.6% higher year-on-year to 2.94 billion ringgit from 2.92 billion ringgit.

"We foresee sustainable performance for the group in the remaining quarter of the financial year despite competition and challenges in the telecommunication industry," Telekom Malaysia said.

However, analysts doubted the company's ability to meet its goal of expanding annual revenue by 3.5%- to-4.0% from 2.9% in 2016.

"Management's earlier FY17 revenue guidance now appears distant," said AmInvestment Bank's analyst Alex Goh. Still, net profit could receive a boost from higher sales of indefeasible rights of use of submarine cables, leased lines and customer projects in the final quarter of the year, he said.

Net profit for the first nine months rose nearly 5.0% to 652.74 million ringgit compared with 621.73 million ringgit in the same period last year. Revenue grew only 0.7% year-on-year to 8.89 billion ringgit from 8.82 billion ringgit in the same nine-months last year.

Year-to-date, capital expenditure as a percentage of revenue was at 18.4%, or 1.63 billion ringgit, with 43% of the budget spent on access followed by core network at 36% and the remaining 21% for support systems.

"In following months, our focus remains the same, to accelerate our convergence action plans and push forward with our Go Digital agenda towards delivering relevant convergence lifestyle communication services and end-to-end business solutions to all our customers," Telekom Malaysia said.

Telekom Malaysia is also targeting to keep earnings before interest and tax at the same level as last year's 1.15 billion ringgit, while capital expenditure as a percentage of revenue could rise to top 30% this year from 27.5% in 2016.

Shares of Telekom Malaysia fell as much as 2.6% on the Malaysian stock exchange following the quarterly result announcement. The stock ended 2.4% lower at 6.00 ringgit, while the benchmark FTSE Bursa Malaysia KLCI closed 0.2% higher.

--Jason Ng

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