This article first appeared in The Edge Financial Daily on October 9, 2018

TIME dotCom Bhd
(Oct 8, RM8)
Maintain buy with an unchanged target price of RM9.30: TIME dotCom Bhd has launched the lowest priced 100Mbps plan in the market at RM99 per month. This is 34% below the previous RM149 package for the same speed, and undercuts similar offerings by both Telekom Malaysia Bhd (TM) and Maxis Bhd. TIME has also unveiled a 1Gbps plan at RM199 per month, which is a first in the country, and surpasses TM’s 800Mbps plan. TIME’s broadband service is available at over 600,000 premises, mainly multi-dwelling units versus the over 2.7 million premises passed by TM.

TIME’s key value proposition is its full 100% fibre network, which offers superior customer experience. This compares to TM’s very high bit-rate digital synchronous line technology applied to its high-speed broadband network, which utilises a combination of copper and fibre. Compared to TM’s 100Mbps plan, TIME’s plan of 500Mbps offers symmetrical download speed.

Although headline retail prices for the plans have been lowered, existing TIME subscriptions (before Oct 7) will be upgraded to higher speed at a new monthly fee or existing monthly subscription, whichever is lower. For example, a subscription of the 100Mbps plan will receive a RM10 monthly discount with the speed bumped up to 500Mbps until the expiry of the contract. New subscriptions signing up for the new plans will be tied on a 24-month contract but can opt for a 12-month contract with upfront payment of RM300.

We think TIME’s new 500Mbps plan may appeal to TM’s users in TIME’s fibre footprint, who are paying from RM139 to RM179 and awaiting speed upgrades from TM of up to 10 times. The same group of subscribers may not want to wait for their packages to be upgraded by TM (and risk not getting the advertised speed) and instead sign up for TIME’s superior fibre network where higher speed can be enjoyed immediately.

While there is a risk of TIME’s subscribers down-trading to lower-priced plans, we think this could be offset by: i) the competitively priced RM99 package, which could appeal to TM’s Unifi or Maxis’ subscribers within TIME’s footprint; ii) stronger demand; and iii) the target to expand its fibre network to reach about one million users by 2020, which opens up a new addressable market.

Note that existing users downgrading prior to the expiration of their contract would be recontracted for 12 to 24 months, and are not eligible for a free router.

We understand the majority of TIME’s subscribers are on the previous RM149 (100Mbps) plan. As TIME introduced its new fibre broadband plans in March 2016, the first batch of users is expected to come out of their contract late in the first or second quarter of 2019.

We remain upbeat about TIME’s data centre (DC) business on continued strong demand from over-the-top players. The capacity at its downtown DC (Menara AIMS) is already optimal, with plans under way to expand capacity at its secondary DC in Cyberjaya.

We make no changes to our core earnings forecasts for now. — RHB Research Institute, Oct 8