This article first appeared in The Edge Malaysia Weekly on December 17, 2018 - December 23, 2018

Shareholders of TIME dotCom Bhd (TdC) would probably be thanking their lucky stars and have little to complain about their investment. The high-speed fibre broadband services provider is the only telecoms stock whose share price rose in the three-year period of June 30, 2015, to June 29, 2018.

During that period, TdC’s share price jumped just over 35% from RM5.65 to RM7.64, growing at a three-year compound annual growth rate (CAGR) of 10.6%.

While it has retraced from its recent high of RM9.695 on Aug 30 last year, TdC shares still had gains to show — in stark contrast to the sea of red displayed by its peers.

The high-speed broadband operator has been consistently rewarding its shareholders with dividends. A bumper dividend was declared on July 1, 2015, of 73.5 sen per share for the financial year ended Dec 31, 2015 (FY2015).

Over the three-year period, TdC declared dividends amounting to 79.1 sen for FY2015 (interim dividend of 5.6 sen per share plus bumper dividend), 20 sen for FY2016 and 17.3 sen for FY2017. For FY2018, TdC has already declared an interim dividend of 17.2 sen.

The special dividend declared for FY2015 comes from the RM423.9 million gross proceeds from disposing of 49.9 million shares in Digi.com Bhd at RM6.23 per share on April 10, 2015, and 18.83 million shares on May 12, 2015, at RM6 per share.

Its last block of 68.72 million shares in Digi.com was sold for RM307.2 million cash in the following year. The gain on the stake sale boosted TdC’s earnings in FY2015 and FY2016, when it posted profits after tax of RM466.9 million and RM407.3 million respectively.

The telco’s revenue was on an upward trend over the three-year period — another sign that business was doing rather well, despite heightened competition. Revenue grew from RM682.36 million in FY2015 to RM766.9 million in FY2016 and RM860.69 million in FY2017.

In the first nine months of financial year ending Dec 31, 2018, TdC’s core net profit jumped more than 77% year on year to RM207.86 million, which the company attributed to higher recurring sales recorded from the data (+25.3% y-o-y) and data centre (+13.4% y-o-y) businesses, among others. It also had a RM10.3 million forex gain versus RM17.6 million forex losses in the previous corresponding year and higher share of profits from associates.

“The group expects the industry to remain challenging for the remainder of 2018 as market players adjust their pricing to remain competitive. It believes that the strategies that have been put in place will grow its market share over the long term. Improvement and expansion of its domestic fibre network footprint continues to be a priority as it grows its retail customer base,” the company said in a Nov 27 statement after the release of its 9MFY2018 results.

On the regional front, TdC said the group will work with its associates in Thailand and Vietnam to connect Malaysia, Singapore,  Myanmar, Cambodia and Laos. The group will also explore opportunities to expand its data centre market presence regionally and grow its current ecosystem to include interconnected players from various industries, it added.

It is worth noting that local high-speed fibre broadband players, including TdC, have been asked by the government to reduce their prices and increase internet speed for customers.

While investors are concerned over rising costs, TdC’s top management says it is neutral and comfortable even if the package is priced according to the industry norm of RM129 (currently RM149) per month for 100Mbps. It welcomes access seekers on to its network and this may be a new wholesale revenue stream.

TdC’s management is also not concerned about cannibalisation but reckons that government policy should be balanced between healthy competition and re-investment into network coverage.

At the time of writing, TdC’share price had retreated to RM8 levels. Nonetheless, seven out of the eight analysts who track the stock have a “buy” recommendation with an average target price of RM9.50, according to Bloomberg.

Hong Leong Investment Bank Research, which initiated coverage on the stock on Nov 28 with a “buy”, said in a note that TdC’s retail operation is gaining momentum on the back of reach expansion and undisputable high value products.

It also said TdC’s data centre is expanding resiliently as IT outsourcing, cloud computing and virtualisation gain wide adoption. Time will tell if these will give shareholders more reason to cheer.

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