KUALA LUMPUR (Nov 26): Hong Leong IB Research (HLIB) has upgraded Time Dotcom Bhd to Buy (from Hold) with a higher target price of RM5.89 (from RM5.09) and said the company’s 9M14 turnover of RM438 million was translated into much-anticipated core net profit of RM112 million, accounting for 74% and 94% of HLIB and street’s FY forecasts, respectively.

In a note Wednesday, HLIB said that on a quarter-on-quarter (q-o-q) basis, Time Dotcom’s weaker top line (-3%) was mainly due to lower global bandwidth sales and income from one-time non-recurring contracts.

Excluding those, revenue would have increase by 1.7% q-o-q on the back of higher data and data centre sales, it said.

HLIB said that on a year-on-year (y-o-y) basis, the company’s revenue advanced 14% thanks to contribution from data centre (+16%), GBS and non-recurring contracts despite voice’s contraction (-8.7%).

“Year-tp-date GBS which traditionally back-loaded in 4Q, surged 218.4% y-o-y to RM31.2 million, somewhat ahead of expectations.

“Pre-sale of submarine cable should help Time Dotcom to monetise and accelerate returns on investments.

“Upgrade from Hold to Buy after raising SOP-derived fair value by 15.7% from RM5.09 to RM5.89,” it said.