Malaysia telco earnings rise 32% in Q1

UOB Kay Hian maintained its market weight call, whilst upgrading Maxis to buy after a share price pullback.

Malaysia’s telecommunications sector posted broadly in-line earnings in the first quarter of 2026, with Axiata and Maxis beating expectations, according to UOB Kay Hian.

Sector core net profit rose 32% year-on-year and quarter-on-quarter to RM1.8b in 1Q26.

The quarter was supported by 2% YoY service revenue growth, continued pre-to-postpaid migration, strong fibre broadband demand, and cost discipline.

UOB Kay Hian raised its 2026 sector earnings forecast by 5%, citing stronger earnings contributions from Axiata and a lower-than-expected impact from Digital Nasional Berhad losses on Maxis.

The brokerage expects sector earnings to grow 5% in 2026 and 18% in 2027.

DNB losses are expected to be consolidated only in the fourth quarter of 2026, as the transfer of shareholding from the Ministry of Finance is expected to materialise toward the end of the year.

UOB Kay Hian expects DNB losses to narrow in 2027 and possibly break even by 2028, supported by cost optimisation and more efficient use of existing tower assets.

CelcomDigi is also on track to deliver RM700m to RM800m in annual cost savings by 2028. Management expects RM465m in projected synergy savings to be reflected in 2026.

Meanwhile, the brokerage upgraded Maxis to buy from hold, with an unchanged target price of RM4.20, following a sharp share price retracement.

It maintained its market weight call on the sector, noting that key catalysts include Axiata’s potential infrastructure asset monetisation and CelcomDigi’s synergy savings by 2027.

UOB Kay Hian named CelcomDigi, Maxis, and Axiata as its top picks.

Key risks include earnings pressure on fixed-line operators from competition, lower-than-expected CelcomDigi merger savings, and an economic downturn that could weaken customer spending and service revenue.