TIME dotCom Bhd
(Dec 2, RM9.12)
Maintain buy with an unchanged target price (TP) of RM10.70: Excluding foreign exchange gains and property, plant and equipment being written off, TIME dotCom Bhd booked a core net profit of RM86 million for the third quarter ended Sept 30 of financial year 2019 (3QFY19) (+22% year-on-year [y-o-y]), taking nine-month (9MFY19) earnings to account for about 76% of our and consensus full-year forecasts.
TIME’s revenue grew healthily by 11% y-o-y for 3QFY19, largely driven by the growth in data (+15% y-o-y) and even voice (+3% y-o-y). By segment, retail was the fastest-growing business with a 24% y-o-y growth, followed by wholesale and enterprise rising 9% and 7% y-o-y respectively. Amid improved cost efficiencies, TIME managed to maintain its adjusted earnings before interest, taxes, depreciation and amortisation margin (pre-Malaysian Financial Reporting Standards [MFRS]) at a relatively high level of 42% for 3QFY19.
Its 9MFY19 capital expenditure spent was about RM109 million (9MFY18: RM122 million), mainly on telco assets with a particular focus on upgrading TIME’s existing network infrastructure and expanding its domestic network coverage in Malaysia.
We believe fixed-line operators such as TIME will likely get a bigger allocation from the RM21.6 billion National Fiberisation and Connectivity Plan, given its extensive nationwide fibre network. Consistent with the national initiatives, TIME is focusing on strengthening its existing domestic fibre network infrastructure and expanding its network coverage throughout Malaysia.
TIME will continue to work with its partners in Thailand, Vietnam and Cambodia to create a seamless regional telecoms network that will connect Indo-China to Malaysia and Singapore. It also intends to expand its data centre market presence regionally, and grow its customer base to include interconnected players from various industries.
We continue to like TIME for its strong growth profile, contributed by both its wholesale (domestic and international) and retail segments. Despite the recent reduction in pricing, the company is still executing well in the domestic fixed broadband market, and we believe it is poised to gain a meaningful market share in the medium to long term. We maintain a “buy” recommendation with an unchanged discounted cash flow-based TP of RM10.70. TIME is trading at an attractive valuation of 15.7 times FY20 price-earnings ratio (-1SD [standard deviation] below the mean) and has a strong balance sheet to support its network expansion. — AllianceDBS Research, Dec 2