TMI plummets on foreign selling

 

SHARES of Malaysian mobile firm TM International fell sharply today, amid heavy selling by foreign hedge funds on concerns of weak profits ahead.

TMI shares dropped 20 sen, 6 per cent, to RM3.12 at close, after hitting its lowest ever level of RM3.04 earlier in the day, as 5.8 million shares changed hands. TM International was listed on the local bourse in April.

Analysts said investors were concerned that a weakening rupiah would result in lower contribution from its Indonesian subsidiary, Excelcomindo, hurting profitability further.

TMI reported a 25.7 per cent dip in third-quarter net profit on November 26, due to higher losses from its overseas subsidiaries as well as increased financial costs, and its share has fallen more than 20 per cent since.

“We see further downside risks to its share price as the potential and persistent weakening of rupiah against the ringgit would lead to a lower earnings translation from one of its biggest subsidiaries, Excelcomindo (XL),” AmResearch said in a note to clients today.

“Based on our estimates, for every 5 per cent depreciation in rupiah against the ringgit, XL’s EBITDA contribution would be lower by 5 per cent. Correspondingly, TMI’s pre-tax profit would be lower by 3 per cent. As it is, rupiah has depreciated by 20 per cent against the ringgit since October 2008.”

Last week, Citi Research lowered its target price for TMI to RM4.50 from RM5.40, saying the company faces a challenging year ahead where it has estimated flat margins.

TMI’s high gearing was also not ideal in the current environment, Citi said. - Reuters