Kenanga Investment Bank (Kenanga) today highlighted the telecommunications sector’s robust performance in its latest report. They maintained an OVERWEIGHT stance on the sector, citing emerging opportunities in data transmission and monetisation from 5G and generative artificial intelligence (Gen AI) solutions for enterprise clients.
For mobile operators, Kenanga noted significant developments expected in the third quarter of CY24, including the announcement of the official 5G Dual Network (DN) policy directive. This is poised to resolve uncertainty and clarify equity stakes among major telco players in Malaysia. These advancements are set to bolster infrastructure and operational capabilities, particularly through enhanced 5G network coverage and integrated cloud solutions.
In the fixed broadband segment, Kenanga anticipates continued growth, albeit at a normalised rate following recent regulatory adjustments. They highlighted the strategic importance of investments in data centers (DCs) and cloud infrastructure, driven by substantial commitments from global tech giants in Malaysia. This includes investments from AWS, Microsoft, and Google, positioning the country as a hub for DC operations and connectivity solutions.
Infrastructure players are expected to benefit from upcoming 5G tower roll-outs across regional markets like Laos, Vietnam, Indonesia, and Malaysia. This expansion is seen as pivotal in supporting telecommunications infrastructure development, with companies like OCK poised to participate actively in tower construction projects.
Kenanga reaffirmed its positive outlook on the sector, emphasising the potential for revenue diversification and growth through expanded service offerings. They highlighted the importance for telco players to leverage 5G, Gen AI, and cloud solutions to drive enterprise sales and mitigate risks associated with traditional retail business erosion.
Investors looking to capitalise on these trends may find opportunities in Kenanga’s top sector picks, TM and CDB. TM stands to benefit from its strategic positioning in data transmission and DC investments, while CDB’s strong subscriber base and revenue diversification strategies underscore its growth potential in the telecommunications landscape.
Kenanga’s recommendation remains OVERWEIGHT for the sector, buoyed by anticipated sector-wide growth driven by 5G deployment, DC investments, and enterprise solution adoption. This outlook reflects their confidence in the telecommunications sector’s resilience and capacity to generate sustainable returns amidst evolving market dynamics.
