1q2016 results analyst briefing - listed company...25 may 2016 this presentation is not and does not...

1Q2016 RESULTS

ANALYST BRIEFING

25 May 2016

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 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

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 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 TM.

Disclaimer

2

Performance Overview

Financial Review

Operating Highlights

Concluding Remarks

3

1Q2016 Highlights (1Q2016 vs. 1Q2015)

4Note: Unless stated otherwise all figures shall be inclusive of Webe

Revenue RM2.86bn(+2.9%)

Reported EBIT

Normalised EBIT

Reported PATAMI

Normalised PATAMI

RM279.9mn(+15.0%)

RM312.0mn(+26.9%)

RM322.4mn(+>100.0%)

RM195.4mn(+9.6%)

Financial Performance

Operational Performance

Positive growth in Internet & Others revenue- Higher subscriber base, customer projects and ICT-BPO revenue

Total broadband take-up continues to grow - now at 2.36mn customers:Streamyx : 1.487mn customersUnifi : 877,000 customers

4


Financial Review


Concluding Remarks

5

Group Results 1Q2016

RM mn

Reported

1Q16 4Q15 % Change QoQ 1Q15 % Change YoY

Revenue 2,855.4 3,184.4 -10.3% 2,774.1 +2.9%

Other Operating Income 41.4 32.7 +26.6% 32.4 +27.8%

EBITDA 923.0 879.7 +4.9% 847.6 +8.9%

Depn & Amort. 643.1 620.5 +3.6% 604.2 +6.4%

EBIT 279.9 259.2 +8.0% 243.4 +15.0%

Other Gains / (Loss) 50.5 (24.7) +>100.0% (0.6) +>100.0%

Net Finance Cost* 47.7 41.0 +16.3% 35.0 +36.3%

FX Gain /(Loss) 104.5 24.6 +>100.0% (41.2) +>100.0%

Profit Before Tax (PBT) 393.2 224.6 +75.1% 172.1 +>100.0%

PATAMI 322.4 192.5 +67.5% 128.9 +>100.0%

Normalised PATAMI 195.4 259.7 -24.8% 178.3 +9.6%

Note: • Unless stated otherwise all figures shall be inclusive of Webe• For Normalised EBIT and Normalised PBT refer Slides 7 and 8• *Excludes FX (Gain)/Loss

6

Higher profitability YoY due to higher revenue and cost efficiencies

Normalised EBIT

RM mn 1Q16 4Q15 1Q15

Reported EBIT 279.9 259.2 243.4

Non Operational

Unrealised FX (Gain)/Loss on International trade settlement

31.9 12.8 2.3

Loss on Sale of Assets 0.2 0.2 0.2

MESRA Programme - 77.4 -

Normalised EBIT 312.0 349.6 245.9

Normalised EBIT Margin 10.8% 10.9% 8.8%

Reported EBIT Margin 9.7% 8.1% 8.7%

EBIT is calculated as Total Revenue (Operating Revenue + Oth. Operating Income) less Operating CostEBIT Margin is calculated as percentage of EBIT against Total RevenueNormalised EBIT Margin is calculated as percentage of Normalised EBIT against Normalised Total Revenue (Operating Revenue + Oth. Operating Income – Loss on Sale of Assets)

Note: • MESRA Programme: a voluntary separation programme for employees aged 55• Unless stated otherwise all figures stated shall be inclusive of Webe

Normalised EBIT higher by 26.9% YoY

7

Normalised PBT

RM mn 1Q16 4Q15 1Q15

Reported PBT 393.2 224.6 172.1

Non Operational


31.9 12.8 2.3

Other (Gain)/Losses* (50.3) 24.9 0.8

Unrealised FX (Gain)/Loss on Long Term loans (104.5) (24.5) 41.2


Normalised PBT 270.3 315.2 216.4

* Comprise of fair value (FV) changes of FVTPL (FV through P&L) investment gain/loss on disposal for AFS (available for sale) investments and gain/loss on Sale of Assets

Normalised PBT higher by 24.9% YoY

8


Total Cost / Revenue ( %)

1 Revenue = Operating Revenue + Other Operating Income

Note: The classification of cost is as per financial reporting

(Please refer to Appendix for breakdown)

Note : Unless stated otherwise all figures shall be inclusive of Webe

Cost % of Revenue1 YoY: lower cost % across several categories

91.3% 91.9%

RM2,563.1 RM2,957.9 RM2,616.9

90.3%

RM mn

21.5% 19.3% 22.2%

17.9% 19.1%18.8%

22.6% 21.8%21.4%

10.9% 11.6%11.7%

7.2% 6.6% 5.9%

6.0% 9.4% 6.0%3.2%

4.1%3.3%

2.0% 0.0%1.0%

Bad debt

Marketing expenses

Supplies & material

Maintenance cost

Other operating cost

Manpower cost

Direct cost

Dep & amortisation

9

1Q15 4Q15 1Q16

Group Capital Expenditure

Note : Unless stated otherwise all figures shall be inclusive of Webe 10

Capex / Revenue ( %)

11.1%

RM mn

Higher Capex in line with expansion of HSBB and SUBB footprint

9.3%

139 160

81 59

38

99

1Q15 1Q16

Access Core Network Support System

258

318

Capex/Revenue ratio at 11.1%

50% Access19% Core Network31% Support Systems

11

Group Cash Flow

RM mn 1Q16 1Q15

Cash & cash equivalent at start 3,510.8 2,975.0

Cashflows from operating activities 528.3 145.7

Cashflows used-in investing activities (769.9) (502.8)

Capex 317.6 258.0

Cashflows from financing activities (77.8) 268.8

Effect of exchange rate changes (0.3) 0.1

Cash & cash equivalent at end 3,191.1 2,886.8

Free cash-flow (EBITDA – Capex) 605.4 589.6

31 Mar 16 31 Dec 15

Return on Invested Capital1 6.76% 6.69%

Return on Equity2 10.20% 11.66%

Return on Assets1 5.19% 5.90%

Current Ratio3 1.31 1.25

WACC 6.88% 7.36%

31 Mar 16 31 Dec 15

Gross Debt to EBITDA 2.08 1.90

Net Debt/EBITDA 1.17 1.02

Gross Debt/Equity 1.03 0.97

Net Debt/Equity 0.61 0.52

Net Assets/Share (sen) 200.7 209.2

Key Financial Ratios


1 Based on Normalised EBIT2 Based on Normalised PATAMI

Stable Cashflows with Debt Headroom


Financial Review


Concluding Remarks

1212

830

862

894

+7.7%

+3.7%

31% of Group Revenue

Higher by 7.7% YoY mainly from increase in UniFirevenue and higher cumulative UniFi customer base and higher revenue from IPTV Content

13

Group Total Revenue by Product

Voice

Internet

30% of total Group revenue

Lower by 0.6% YoY, mainly due to lower voice revenue at Mass Market and Managed Accounts which offset higher revenue at Global & Wholesale

Note : Unless stated otherwise all figures shall be inclusive of Webe*Total revenue is after inter-co elimination.

849 853

854

880

849

-3.5%

-0.6%

YoY

YoY

RM mn

RM mn

1Q15 4Q15 1Q16

1Q15 4Q15 1Q16

14

Group Total Revenue by Product

Data

Others*


Higher by 1.4% YoY, mainly contributed by GITN and Global & Wholesale


2.8% higher, mainly due to higher USP amortisation revenue

Increased revenue at Managed Accounts by VADS and Government


*Others comprise other telco and non-telco services (i.e ICT-BPO, MMU tuition fees, customer projects)

627

741

636

+1.4%

-14.2%

463

701

476

-32.1%

+2.8%

YoY

YoY

RM mn

RM mn

1Q15 4Q15 1Q16

1Q15 4Q15 1Q16

Group Total Revenue by Line of Business

15

+3.5%

-1.4%

Higher revenue growth led by increase in UniFirevenue at TM Consumer

Positive revenue growth driven by major LOBs, mainly at VADS, in particular ICT-BPO products

Mass Market Managed Accounts

+0.9%

-12.3%

YoY YoY

Note: Unless stated otherwise all figures shall be inclusive of Webe

RM mn RM mn

1,167

1,2251,208

1Q15 4Q15 1Q16

1,027

1,182

1,037

1Q15 4Q15 1Q16

16Note: Unless stated otherwise all figures shall be inclusive of Webe

+9.3%

-23.4%

Higher YoY revenue by 9.3%, mainly contributed by higher bilateral revenue

Lower YoY by 3.0%, mainly due to lower revenue at Webe

Global & Wholesale Others*

Group Total Revenue by Line of Business

*Others include revenue from Property Development, TM R&D, TMIM, UTSB, MKL & Webe

-3.0%

-16.1%

YoY YoY

RM mn RM mn

393

561

429

1Q15 4Q15 1Q16

187

216

181

1Q15 4Q15 1Q16

Physical Highlights

Broadband

190

+1.0%

89

Cu

sto

me

rs (

In t

ho

usa

nd

)A

RP

U (

RM

)

UniFi ARPU (Blended) Streamyx Net ARPU

UniFi continues to drive growth, with 877,000 customers (38,000 net adds QoQ)

Total broadband customers at 2.36mn

Unifi ARPU at RM192 and Streamyx ARPU stable at RM89

17

86

190

87

192

2,266 2,288 2,294

+4.3%

2,340

89

190

Strong growth of Unifi customers YoY. ARPU levels are steady

2,364

89

192


Financial Review


Concluding Remarks

1818

Key Takeaways


Operating revenue grew by 2.9% YoY, driven by Internet & Others

Reported EBIT higher by 15% YoY to RM279.9mn Normalised EBIT higher by 26.9% YoY at RM312mn

Reported PATAMI higher by >100.0% YoY at RM322.4mn Normalised PATAMI higher by 9.6% YoY at RM195.4mn

Capex/revenue ratio at 11.1%

Leadership in broadband: Total broadband customers 2.36mn to date 59% customers on packages 4mbps and above Stable ARPU

Appendices

20

Normalised EBITDA

RM mn 1Q16 4Q15 1Q15

Reported EBITDA 923.0 879.7 847.6

Non Operational

Unrealised FX (Gain)/Loss on International trade Settlement

31.9 12.8 2.3

Loss on Sale of Assets 0.2 0.2 0.2


Normalised EBITDA 955.1 970.1 850.1

Normalised EBITDA Margin 33.0% 30.2% 30.3%

Reported EBITDA Margin 31.9% 27.3% 30.2%

EBITDA is calculated as Total Revenue (Operating Revenue + Oth. Operating Income) less Operating Cost (Exc. Depreciation, Amortisation & impairment).EBITDA Margin is calculated as percentage of EBITDA against Total RevenueNormalised EBITDA Margin is calculated as percentage of Normalised EBITDA against Normalised Total Revenue (Operating Revenue + Oth. Operating Income – Loss on Sale of Assets)

21


Normalised EBITDA higher by 12.4% YoY

Normalised PATAMI

RM mn 1Q16 4Q15 1Q15

Reported PATAMI 322.4 192.5 128.9

Non Operational


27.8 8.0 7.4

Other (Gain)/Losses* (50.3) 24.9 0.8

Unrealised FX (Gain)/Loss on Long Term loans (104.5) (24.5) 41.2

MESRA Programme (Net of tax) - 58.8 -

Normalised PATAMI 195.4 259.7 178.3

* Comprise of fair value (FV) changes of FVTPL (FV through P&L) investment gain/loss on disposal for AFS (available for sale) investments and gain/loss Sale of Assets

22


Normalised PATAMI higher by 9.6% YoY

Cost % of Revenue

1Q16 4Q15 1Q15Comments

(1Q2016 vs. 1Q2015)

Operating Revenue (RM mil) 2,855.4 3,184.4 2,774.1 -

Other Operating Income(RM mil)

41.4 32.7 32.4 -

Direct Costs % 18.8 19.1 17.9Higher International Outpayment at TM Global

RM mil. 544.5 615.1 502.3

Manpower % 21.4 21.8 22.6 Lower due to reduction in certain allowances and employee leasing costRM mil. 620.4 700.7 633.1

Supplies & Materials % 6.0 9.4 6.0Increase mainly in COS Material at Managed Accounts

RM mil. 174.9 301.1 167.1

Bad & Doubtful Debts % 1.0 0.0 2.0Lower rate of expected losses from Mass Market due to better credit managementRM mil. 30.1 1.2 57.3

Marketing Expenses % 3.3 4.1 3.2Higher A&P at Mass Market for webe activities

RM mil. 95.9 133.1 89.1

Maintenance Cost % 5.9 6.6 7.2Reduction of OPEX maintenance in TM Government

RM mil. 169.9 213.5 202.9

Other Operating Costs % 11.7 11.6 10.9Increase in forex loss for trading settlement and deposits

RM mil. 338.1 372.7 307.1

Depreciation & Amortisation % 22.2 19.3 21.5 Higher assets write-off and accelerated depreciation in Webe, higher amortisation of content cost

RM mil. 643.1 620.5 604.2

Total (RM mil) 2,616.9 2,957.9 2,563.1

Total (%) 90.3 91.9 91.3


Group Balance Sheet

Note : Unless stated otherwise all figures shall be inclusive of Webe24

RM millionAs at

31 Mar 2016As at

31 Dec 2015Shareholders’ Funds 7,541.5 7,780.6Non-Controlling Interests 311.5 258.1

Deferred & Long Term Liabilities 10,566.1 10,551.8Long Term Borrowings 7,179.2 7,175.4Deferred Tax 1,392.9 1,367.6Deferred Income 1,670.2 1,661.7

Derivative financial instruments 295.0 321.9

Trade and other payables 28.8 25.2

18,419.1 18,590.5

Current Assets 6,882.6 7,297.5Trade Receivables 2,142.8 2,353.1Other Receivables 654.2 594.0Cash & Bank Balances 3,191.9 3,511.6

Others 893.7 838.8Current Liabilities 5,247.7 5,822.6

Trade and Other Payables 3,601.3 4,367.0

Short Term Borrowings 587.7 408.3Others 1,058.7 1,047.3

Net Current Assets/(Liabilities) 1,634.9 1,474.9Property Plant & Equipment 14,903.0 15,186.9

Other Non-Current Assets 1,881.2 1,928.7

18,419.1 18,590.5

712 694 685

405 399 397

772 814 844

396 650 418

Others

Internet

Data

Voice

-6.8%

4Q15

2,194 2,407

+2.3%

Note: Total revenue is after inter-co elimination. Revenue by product is before inter-co elimination *Others comprise other telco and non-telco services (i.e: ICT-BPO, MMU tuition fees, customer projects)

Mass Market & Managed Accounts

Revenue by Product

1Q15 1Q16

2,245

RM mn


141 190 168

277

405 299

31

35

31

Others

Data

Voice

561

-23.4%

4Q15

429393

+9.3%Revenue by Product

Global & Wholesale

1Q15 1Q15

RM mn

THANK YOUInvestor Relations

Level 11 (South Wing), Menara TMJalan Pantai Baharu50672 Kuala Lumpur

MalaysiaTel: (603) 2240 4848/ 7366 / 7388

[email protected]

1q2016 results analyst briefing - listed company...25 may 2016 this presentation is not and does not...

Documents