Telekom Malaysia update – Special dividends on the way? (CIMB)

TM announced that it sold off its remaining shares in Axiata yesterday. Including some shares which we believe were sold in the open market, we estimate TM raised about RM500m or RM0.14/TM share. We think TM will pay a special dividend this year with the proceeds from the sale. Separately, at a luncheon we hosted with domestic investors, TM revealed that: 1) Unifi’s net adds continued to accelerate in July, and 2) it is negotiating with mobile operators to enable them to offload their data traffic onto TM’s extensive WiFi network. TM remains an OUTPERFORM with a SOP-based target price of RM4.92 and our top Malaysian telco pick. Likely price catalysts include the strong take-up of Unifi, expectations of a special dividend and positive earnings surprises.