• 4Q18 core earnings advanced 4% qoq and 19% yoy due to strong recurring revenue growth. Meanwhile, retail segment continued to perform despite of “Double speed, Half price” move in 4Q18.
• 2018 core earnings grew 61% and exceeded ours and consensus estimates at 107% and 116%. It declared a total of 20.54sen DPS, which represent 44% dividend payout
• We raised our earnings forecast 2019F/2020F by 19%/16% as we expect the cost efficiency to carry through in coming years.
• Maintain BUY with a higher TP of RM10.00. We believe its cost optimisation provides ample room for the Time to buffer against potential competition.

Preference on 500mbps

4Q18 core earnings advanced 4% qoq and 19% yoy on strong recurring revenues across all segments. Noteworthy, despite its “Double speed, Half price” campaign in Oct 2018, retail sales continued to grow at 3% qoq and 39% yoy on enlarged subscriber base. The price cut was also mitigated by new subscriptions focusing on the 500mbps package at RM139/mth instead of the 100mbps at RM99/mth.

Splendid FY18 performance

2018 core earnings grew strongly by 61% to RM278m. Data and data centre revenues grew 22% and 18% respectively to more than offset the 11% decline in voice. Its core net margin expanded to 28.3% from 23.0% on better cost efficiency achieved although we note that depreciation and interest expenses grew. The achievement was also attributed to better network connectivity arising from higher capex spent for domestic network expansion and upgrading TIME’s existing network infrastructure during the year.

Riding on growth momentum and cost optimisation

We expect growth across all segments (ie wholesale, retail, enterprise) would remain robust amidst digitalisation initiatives across various businesses. Meanwhile, its revamped cost structure should sustain margins and/or buffer against potential competition, if any. We raised our earnings for 2019F/2020F by 19%/16% to reflect the improved efficiency.

Maintain BUY with revised RM10.00 TP

Maintain BUY with a higher RM10.00 DCF-derived TP (from: RM9.70). Despite drastic changes in the fixed broadband landscape, we believe Time would is poised to deliver strong growths on the back of growing demand for data and data centres. While competition could intensify, we believe its unparalleled network quality experience would attract more high value customers while its improved cost structure provides room to buffer earnings against possible pick up in competition.

Source: BIMB Securities Research - 1 Mar 2019