• Overview. TIME’s 1Q22 normalised PATAMI increased 16.4% yoy to RM97m mainly due to stronger performance in its core business segments. However, on a qoq basis, TIME’s normalised PATAMI declined 11.8% in tandem with lower revenue attributable to a decline in contribution from the data centre segment coupled with higher cost.

• Key highlights. TIME’s data and data centres revenue recorded double-digit growth yoy to RM283m (+12.2%) and RM72m (+15.2%) primarily due to the higher recurring revenue. However, on a qoq basis, the 16% decline in data centres was due to the seasonality effect during the quarter. Thus, moving forwards, we expect data and data centres to continue to contribute escalating revenue owing to robust demand from retail and enterprise segments.

• Against estimates: Inline. TIME’s 1Q22 normalised PATAMI of RM97m came in within our and consensus’ estimate, making up 22.2% and 22.9%, respectively.

• Outlook. We remain upbeat on TIME’s business prospects given its positive long term business outlook. We believe this is fair as we expect earnings to grow at a 3-year CAGR of 13.5% over 2021 – 2024F owing to its attractive outlook on strong demand for data and data centres coming both from retail and enterprise segments.

• Our call. Reiterate our BUY call with DCF-derived TP of RM6.65 (WACC: 6.4%; g:1.0%). At our TP, the stock implies a 2022F PER of 27x, above its 5-year PER of 25x. We think our valuation is justified given the anticipated substantial earnings growth in 2022 due to a solid outlook for internet connectivity, leading to a higher number of new subscribers and pent-up demand for data centres and cloud services.

Source: BIMB Securities Research - 31 May 2022