5G: Telecommunication Investment in Malaysia [KLSE STOCK SERIES]

lipkarlock Wednesday, May 25, 2022

Everyone uses phones in Malaysia, and with this, we understand telecommunication is one of the most important needs literally for everyone.

With this, let us look at some of the biggest telco companies in Malaysia, and see whether we can identify any opportunity for investment.

Some of the most famous telco companies in Malaysia that are investable through KLSE are (in the order of market capitalisation):

Axiata - RM29.5B

Maxis - RM28.3B

Digi - RM26.7B

TM- RM18.5B

TIMECOM - RM7.9B

OCK - RM422M

REDTONE - RM336M

BINACOM - RM105M

XOX - RM76M

AMTEL - RM59M

DIGISTA'O - RM52M

Based on some of the share price performance for the past 1 year, the telco industry have been suffering with a continuous downturn so far.

Averagely, the telco industry in Malaysia is down about 19.7%.

With this, do we want to enter any position right now?

Looking at the table above, even with the recent selling, the PE ratio is still quite high for some of the telco names like Axiata, Maxis and Digi. Binacom is even higher at PE 49.2! Only Redtone is seeing quite a low PE at 10.1.

In term of dividend yield, Redtone is giving up to 6.6%.

Maxis dividend yield is at 4.8%.

Digi is giving a 4.3% dividend yield.

Averagely for the telco industry, the dividend yield is at 3.6%.

So the 3 companies above are giving above average dividend yield.

If we just to look at Digi PE Ratio history, even with the recent drop, the PE is still at 23.4.

If the PE can drop below 20, perhaps value investor can start to consider the stock in term of PE valuation.

For Maxis PE Ratio history, even with the recent drop, the PE is still at 21.9.

There was a time where the PE is so high at > 30.

So currently the value is much better.

But Maxis has a PE below 18 before.

If Maxis can drop to below 18, Value Investor can start to look into this stock.

While for Axiata, somehow the PE ratio is always pretty high.

The current PE is at 36.3.

No so attractive compare to Digi and Maxis.

And the dividend yield is also low at 2.9% only.

DIGI Trailing PE:

MAXIS Trailing PE:

AXIATA Trailing PE

Looking at the recent selling pressure based on the share price chart below, seems like we need to wait further for the share price to stabilize a bit.

Indeed, the market has been quite volatile.

It is very important for investor to stick to their own investment rules before starting a postion.

Note that Telco are still growing in term of their revenue.

With the recent pandemic, more and more people are paying for broadband services.

Of course, 5G will be one of the driver of this industry.

For example, you can see that Maxis and MIMOS and HUAWEI is doing a collaboration to build a 5G Innovation Hub to accelerate the industrial use-cases enabled by 5G, AI and other advanced technologies as well.