TM likely to drop out of top-30 KLCI companies list

TM is likely to drop out of the FBM KLCI when leading stock market indices provider FTSE Russell announces its review next month. At the same time, Top Glove Corp Bhd — one of the world’s largest rubber glove manufacturers — could see itself being listed on the index, based on its market capitalisation as of last Friday, The Edge Markets reported.

The FBM KLCI, is a stock market index, that list 30 of the largest companies on the Bursa Malaysia by market capitalisation that meet the eligibility requirements of the FTSE Bursa Malaysia Index Ground Rules.

Yesterday, TM announced its quarterly financial statement and the outlook is grim as the company reported its first quarterly loss in over 10 years. In the same statement, TM also announced that it will be revising its dividend distribution policy effective from the next dividend payout in the wake of the RM175.6 million net loss posted in the last three months ending September 30th.

TM has 2.29 million broadband customers including 1.26 million unifi subscribers.

Year to date, the decline in TM’s share price has wiped out about RM14.93 billion in market capitalisation, following the government’s announcement that key telecommunications players in the country, including TM, have reached agreements on the mandatory standard on access pricing (MSAP), which will result in lower fixed broadband prices.

According to The Edge Markets, AmInvestment Bank lowered its target price on TM shares to RM2.17 per share earlier this month due to its uncertain longer-term outlook.

“This stems from the group’s clouded longer-term prospects, given the intensifying broadband competition and implementation of the MSAP, which has reduced wholesale prices for third-party operators to access TM’s high-speed broadband network,” wrote analyst Alex Goh in a recent note.

Goh also noted speculation that TM may be requested to take over MYTV Broadcasting Sdn Bhd to enable the switch from analogue to digital broadcasting, following a payment dispute between the two companies.

It was reported that MYTV owes TM over RM60 million for services rendered, which has resulted in the former’s services being suspended in several states.

“We view such a potential development negatively as the taking over of MYTV will easily require an additional capex (capital expenditure) of RM300 million for the remaining sites to be built in Malaysia. Additionally, MYTV’s outstanding bills may lead to substantive receivable write-offs to TM’s bottom line,” said Goh.

TM shares opened at RM2.22 today.

How are companies listed to the FBM KLCI?

CIMB Investment Bank head of equity research Ivy Ng said a stock would be added as a component if its market capitalisation rises to the 25th place or above, while one will be removed from the index if it falls to the 36th position and below, based on rules set by FTSE Russell.

“According to the ground rules of the FTSE Bursa Index Series, FTSE Russell will use the data from the close of business on Monday, four weeks prior to the review effective date. Based on this, we deduce that the coming review will use market capitalisation data as at Nov 26, after the market closes,” she said.

As at Nov 23, TM had fallen to the 40th position, putting it at risk of removal, while no eligible company had climbed to the 25th place or higher.

Meanwhile, Top Glove climbed to the 28th position, which could qualify the rubber glove manufacturer’s entry into the index, said Ng, provided that no other company rises to the 25th position and above before the review deadline.