• 1Q19 core earnings grew 6.4% yoy driven by strong growth in data revenue and all customer segment.
• On qoq basis, its core PBT marginally eased 0.7% due to the absence of non-recurring revenue in addition of lower in voice and data center revenues.
• We expect retail segment to remain as the growth driver on strong demand for FTTH services and further network expansion programme
• Reiterate BUY with RM10 TP. We expect Time to remain one of the best beneficiaries growing FTTH demand given its established presence at both the retail and back-end (ie. data centre) segments.

Strong yoy growth

1Q19 core earnings grew 6.4% driven by 15% growth of data revenue. On segmental basis, Retail segment grew 26% mainly due to enlarged subscriber base. This is on the back of “Double Speed, Half Price” campaign in Oct 2018 and 35% more premises passed in 2018.

Marginal decline on qoq basis

On qoq basis, core PBT marginally eased by 0.7% on lower topline. The marginal drop of the topline is due to the absence of non-recurring revenue (4Q18: RM2.9m) in addition to lower voice (-6% qoq) and data centre (-2% qoq) revenues. Nevertheless, retail segment continues to record robust growth of 4% qoq.

Retail continues to lead the growth

We expect the retail segment to remain the growth driver on the back of strong demand for FTTH services and further network expansion programme. Management has allocated higher capex of RM320m (30% of our revenue estimate) in 2019 against RM276m spent in 2018. This includes capex for the new data centre in Cyberjaya to meet future demand especially from OTT content providers.

Reiterate BUY with RM10.00 TP

We reiterate our BUY call with RM10.00 DCF-derived TP. We believe the growth in retail segment remains robust on enlarged subscriber base albeit dilution of ARPU. The latter is mitigated by higher subscription on RM139/month plan instead of its entry price plan of RM99/month. Notably, it would also benefit from its position as carrier neutral provider which bodes well with the increasing demand for data and data centre.

Source: BIMB Securities Research - 27 May 2019