kimeng: 27 feb TM (hold)

> Results within expectations
> Results were within expectations; reported FY07 EPS came in at 74.4 sen
> versus our estimate of 73.1 sen. Telekom Malaysia (TM) saw a lower EPS
> of 17.2 sen in Q4 (Q307: 19.2 sen) due to higher asset impairment.
> Despite the weaker Q4, TM still posted a 22% rise in EPS in FY07, helped
> by decent revenue growth, exceptional gains and reversal of excess tax
> provision. Adjusted for one-off items, FY07 normalised EPS was 63.4 sen
> versus 50.4 sen in FY06. Normalised EBITDA margin was 42.5% in FY07,
> down from 43.3% in FY06. All-in, TM achieved its key performance targets
> for revenue and ROE, but did not meet its target FY07 EBITDA margin of
> 44.5%. TM proposed a final gross dividend of 22 sen, bringing the total
> gross dividend to 113 sen (including the special gross dividend of 65
> sen paid on 31 Jan 2008), translating to a net payout of 113%.
>
> TM to be a yield play; TMI to be a growth play
> The 2 separate entities will have different capital management
> initiatives tailored to their different needs. Post de-merger, FixedCo
> intends to distribute dividends of RM700m or up to 90% of its nomalised
> net profit, whichever is higher. Meanwhile, TMI's payout will be less
> than TM's (pre de-merger) payout of 40-60%, given its needs for funds to
> finance its expansion.