Kenanga Research has ‘buy’ call on Time dotCom
KUALA LUMPUR: Time dotCom Bhd was in a favourable position during the Movement Control Order period where homebound work arrangement was more prevalent and the need for home Internet became more pressing.
This could nudge Time’s average revenue per user (ARPU) higher, said Kenanga Research.
The firm said presently, Time’s household packages were the most competitive in the market based on the respective speeds offered, giving existing customers little incentive for migration.
“We anticipate small factors that could cause customers to deviate away from the Time brand, with its almost entirely recurring income mix to boast its sustainable business model.
“Meanwhile, other spaces (i.e. mobile) are only experiencing heightening competition which threatens earnings.
“The group also is the only large capitalised telco with a net cash position (RM420.3 million for the second quarter of this financial year’s results).
“While we do not anticipate the group to be a key participant in future nationwide 5G plans, it could still meaningfully contribute in fiberising our national network,” Kenanga Research said in a report.
Time also holds a strong presence in hosting data centres, where prospects are helmed by the increase in dependency of cloud computing and data storage outsourcing becoming commonplace and cost efficient for corporations.
“Hence, we opine the segment could face little resistance for growth plus the lack of large-scale competition locally.”
By this end-financial year, a new Cyberjaya site would add 10,000sq ft of net lettable area, or 13 per cent from an existing 78,200sq ft locally, which was scalable when capacity becomes utilised, the firm said.
Time has also entered into a strategic partnerships with CMC Telecom from Vietnam and Symphony Communication and KIRZ Holdings of Thailand.
Kenanga Research said with this, Time had gained land access into other neighbouring Asean countries, which are seeing an expanding data centre market.
At the same time, this provides a gateway to Time’s submarine cables (AAE-1, APG, FASTER, Unity/EAC-Pacific, SKRIM) for the benefit of larger hyperscale tech companies.
Kenanga Research said as of the first half of this financial year, Time’s associates had contributed RM8.5 million (up 21 per cent year-on-year) to group profits.
The firm estimated a 10 per cent and nine per cent revenue growth, respectively, for Time’s financial years 2020 and 2021 on better data demand, to be slightly offset by the diminishing use of voice services for communication.
Time’s earnings before interest, taxes, depreciation and amortisation margins of 45 per cent (versus other operators at 40 per cent) could be sustained by leaner fixed cost management, which should translate to net earnings growth of five per cent and nine per cent for this financial year and the next, respectively.
Kenanga Research has initiated coverage on Time with a “buy” call and a target price of RM14.