Brief Overview
TeleChoice International reported strong 1H26 results that exceeded expectations, with revenue and PATMI representing 52% and 59% of full-year forecasts respectively. PATMI surged 87% year-on-year to S$4.9mn, driven primarily by the company’s 4PL handset supply chain management (PCS) business supporting U Mobile’s subscriber growth. The company maintained its BUY recommendation with an unchanged target price of S$0.33.
Investment Positives
The standout positive for TeleChoice centres on the strong momentum in its PCS division. PCS revenue grew an impressive 25% year-on-year in 1H26 to S$205mn, whilst profit before tax spiked 140% to S$6.1mn. This growth was driven by U Mobile’s expansion in mobile subscribers, with handset demand receiving additional support from promotional activities and increased subsidies as more consumers transition from prepaid to postpaid plans.
The analyst believes U Mobile’s 5G network coverage, network quality, retail presence, and digital touchpoints have spurred strong subscriber growth and supported handset demand. This has directly benefited TeleChoice’s handset supply chain management operations, with higher handset promotional activity and increased subsidies contributing to higher conversion rates of postpaid subscribers.
The growth trajectory for PCS remains impressive, with the major customer U Mobile pursuing an aggressive strategy to increase market share through its differentiated 5G network infrastructure. Additionally, the network engineering and ICT divisions are showing signs of turnaround, though with some constraints.
Investment Negatives
The primary concern lies in the weakness observed in TeleChoice’s ICT and Network Engineering Services (NES) divisions. The ICT segment suffered a 5% decline in profit before tax, attributed to intense competition and shrinking customer budgets. The division’s margin pressure is further evidenced by lower-margin hardware sales now accounting for 56% of ICT revenue, compared to 47% in 1H25.
The NES division faces margin decline due to the weak Indonesian rupiah, which has impacted the profitability of operations in that market. There was also no update provided on the data centre project in Malaysia during the reporting period.
Outlook
The analyst maintains an optimistic outlook, particularly regarding the PCS division’s growth potential. Digital infrastructure and data centres remain key priorities to support the next phase of growth. Expanding into data centre projects remains a critical focus, though this is currently pending resolution of regulatory and infrastructure bottlenecks in Malaysia.
Recommendation & Target Price
Phillip Securities Research maintains a BUY recommendation for TeleChoice International with an unchanged target price of S$0.33, which is in line with the system integration sector. The FY26 PATMI forecast remains unchanged.
Frequently Asked Questions
Q: What drove TeleChoice's strong 1H26 performance?
A: The 4PL handset supply chain management (PCS) business drove earnings growth in line with U Mobile's subscriber growth, with PATMI spiking 87% year-on-year to S$4.9mn.
Q: How did the PCS division perform specifically?
A: PCS revenue grew 25% year-on-year to S$205mn, whilst profit before tax spiked 140% to S$6.1mn, driven by U Mobile's mobile subscriber growth and increased handset demand.
Q: What factors are supporting U Mobile's growth?
A: U Mobile's 5G network coverage, network quality, retail presence, and digital touchpoints have spurred strong subscriber growth and supported handset demand.
Q: What challenges is the ICT division facing?
A: ICT suffered a 5% decline in profit before tax due to intense competition and shrinking customer budgets, with lower-margin hardware sales now accounting for 56% of ICT revenue.
Q: Why are NES margins declining?
A: NES margin decline is attributed to the weak Indonesian rupiah affecting operations in that market.
Q: What is the status of the Malaysian data centre project?
A: There was no update provided on the data centre project in Malaysia, with expansion into data centre projects remaining a critical focus pending regulatory and infrastructure bottlenecks.
Q: What is the investment recommendation?
A: Phillip Securities Research maintains a BUY recommendation with an unchanged target price of S$0.33, in line with the system integration sector.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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