• Maintain BUY (TP: RM6.09). TIME’s 3MFY24 revenue of RM417.8mn (+13.4% YoY) supported by higher contribution from Retail (+13.0% YoY), followed by Enterprise (+15.0% YoY) and Wholesale business (+12.0% YoY). Nonetheless, the group’s net profit slightly down by -1.8% YoY. Excluding non-recurring items, TIME recorded core net profit of RM108.9mn (+7.1% YoY) which in-line with ours and consensus expectations, accounting for 23% and 24% respectively. Maintain a BUY call on TIME with an unchanged TP of RM6.09 (WACC: 6.4%; g: 1.0%).

• Key highlights. On a quarterly basis, TIME's revenue experienced a slight decline of -1.1% YoY. However, at PBT level, the group achieved a significant growth of +27.7% QoQ due to (i) lower provision for impairment of property, plant, and equipment, (ii) decreased inventory write-offs, (iii) net foreign exchange gains compared to losses in the previous quarter and (iv) higher share of profit from associates and jointly controlled entities. Core earnings increased by 7.3% QoQ, attributed to sustained operating margins and increased profit from investments, while the previous quarter incurred higher submarine-related costs and start-up costs for new energy ventures.

• Earnings Revision. No change to our forecast.

• Outlook. In regards with the influx of investments into data centres in Johor, the group has guided that this has led to increased inquiries and demand for submarine cable system to connect to North Asia, North America, Europe, and nearby regions like Singapore and Thailand. While there has been a net increase in inquiries and sales due to these investments, the impact is not significant. All in all, we expect sustained contributions from data and data centres, the group’s main earnings driver, due to growing demand for data. The increasing digitalisation across various industries is further boosting the need for data. Additionally, we believe that the rising adoption of AI is a one of the factor creating opportunities for data centre service providers and prompting a shift in data center strategy to meet AI workload requirements.

Source: BIMB Securities Research - 30 May 2024