Bimb Research Highlights

TIME DotCom (TDC MK) - Still Favouring Fixed Player

kltrader
Publish date: Fri, 19 Jan 2024, 04:44 PM
kltrader
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Bimb Research Highlights
  • We favour TIME dotcom (TIME) due to the group's positive momentum, driven by ongoing expansion efforts and the expected significant contributions from data and data center operations primarily driven by higher demand from Retail & Wholesale customer.
  • The anticipated drivers of TIME's earnings include (i) increased connectivity through internet usage in both individual and business settings, and (ii) heightened demand for data and cloud services propelled by continued acceleration in digital transformation initiatives.
  • Maintain a BUY call with DCF-derived TP of RM6.09 (WACC: 6.4%; g: 1.0%).

Data business improved

In 9M23, TIME's revenue experienced double-digit growth, increasing by +10.4% YoY to reach RM1,169mn. This growth was driven by higher contributions from Retail (+19.0% YoY), followed by Enterprise (+17.0% YoY) and Wholesale business (+6.0% YoY). In tandem, the group's net profit surged by over 100% YoY. However, excluding a one-off nonrecurring revenue, TIME recorded a core net profit of RM310mn, reflecting a solid growth of +7.6% YoY.

To continue focus on execution

TIME has indicated that the group is actively expanding its network footprint to meet the demand of all customer groups. The company emphasizes a commitment to operational excellence and innovation, aiming to enhance customer experiences while vigilantly monitoring operational and external risks for long-term sustainability. In terms of strategic direction, TIME has communicated that it will reinvest proceeds from divestments into strengthening core businesses. This involves expanding coverage, improving propositions, and enhancing service quality. To recap, its discontinued operations have been finalized in April 2023 following the divestment of stakes in AIMS Data Centre Holdings Sdn Bhd and AIMS Thailand. While we believe reinvesting its divestment proceeds can enhance product quality and gradually expand the group's core businesses, we remain concern about the potential impact of intense competition from other service providers in terms of network coverage and the range of services they offer. Looking ahead, we expect significant contributions from data and data center operations, driven by growing demand for data. We favour TIME due to the group’s positive momentum, thanks to its ongoing expansion efforts.

Maintain a BUY call with TP of RM6.09

Maintain a BUY call with DCF-derived TP of RM6.09 (WACC: 6.4%; g: 1.0%).

Downside risks to our call

The downside risks to our call include: (i) strong competition from other service providers in terms of network coverage and the range of services provided, which could impact TDC’s business cluster, and (ii) weakerthan-expected margins.

Source: BIMB Securities Research - 19 Jan 2024

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