MIDF Downgrades Telekom Malaysia To Neutral From Buy

 MIDF Research downgrades Telekom Malaysia (4863.KU) to Neutral from Buy; "we continue to like TM for its defensive capabilities. But due to the recent spike in its share price, we have downgraded our recommendation." 

It notes there was no 3Q11 dividend, as expected, but it still estimates a FY11 dividend yield of 6.3%. 

It lowers FY11-FY12 earnings forecasts by 8.6% and 8.4%, respectively on expectations of a lower forex gain. It keeps a MYR4.45 target.

It notes the first nine months' net profit came in below the house's expectation, but exceeded consensus' forecasts due to MIDF underestimating net finance cost; operating profit was in line. "We are not disturbed with TM's 24.3% on-year decline in its 9M11 net profits due to non-operational issues, i.e. the unrealized forex gain and loss to its foreign denominated borrowings." 

It notes FY11's first nine months' forex loss of MYR73.0 million compares with a forex gain of MYR319.5 million in the same period a year ago. The stock is down 2.3% at MYR4.34.