We organized Bursa-HLIB Stratum Focus Series XII event recently with the theme – “Cloud Computing: It’s Now and the Future”. MCMC emphasized that the pre-requisite for digitalization is network/ connectivity, including both fibre and mobile. TdC is supported by its own regional extensive fibre network, DC/ cloud operated under an ecosystem which it has full control and self maintained guaranteeing quality of service towards customers. Since 2016, MPR adopted cloud and has witnessed multifaceted benefits. With so many advantages over on-premise infrastructure, cloud adoption is rapidly rising and expected to the norm going forward. For exposure, both TM (BUY, TP: RM7.93) and TdC (BUY, TP: RM5.61) are leading data centre and cloud service providers in Malaysia.

The webinar. In collaboration with Bursa Malaysia, we organized a Stratum Focus Series XII event recently with the theme of “Cloud Computing: It’s Now and the Future”. For this event, we were honoured to have four distinguished guest speakers with diverse backgrounds to share on Malaysia’s digital transformation via hyper scale data centre and cloud computing. Below are the main excerpts from the event:

Dr Fadhlullah Suhaimi Abdul Malek, MCMC Chairman

• Covid-19 is a stress test for Malaysia infra: (i) internet traffic surged; (ii) usage moved to residential area; (iii) speed reduced; and (iv) complaints increased.
• Digitalization Becomes a “must Have”.
• The pre-requisite for digitalization is network/ connectivity (see Figure #1) – both fibre and mobile (4/5G).
• Continued investments in 4G are still required for seamless coverage and quality, as well as addressing urgent digital divide concerns.
• Focus on quality: resources (spectrum) to be optimized, thus 3G shutdown to allow re-farm for 4G.
• Cloud service regulation was introduced to increase accountability for user data security and sustainability of services.
• Cabotage policy to protect sovereignty. 2 major improvements – (i) e-DSL approval as fast as 3-7 days vs 30 days previously; (ii) end-to-end digital processing by Jabatan Laut Malaysia (neutral party). Key objective is to (i) open for business; and (ii) take/ expedite investments.
• 5G wholesale pricing: allow DNB and cellcos to negotiate. MSAP will be made public (no later than 2Q22) once all cost elements are identified. The cost for 5G should be lower than 4G.

Mr Kit Au Wong Lian, Time DotCom EVP

• 52% of Malaysian organizations are seeking a multiple or hybrid cloud environment to manage workload, storage and backup.
• Buying cloud from CSP is more beneficial vs self-build: (i) rapid deployment and setup; (ii) faster time to market; (iii) compliance in all regions; (iv) vendor support and maintenance; (v) no changes to infrastructure; and (vi) security verified and audited.
• TdC can deploy services with 80% less effort while maintenance at scale requires ~20x less manual work.
• TdC has adopted NFVi (network function virtualization infrastructure) for (i) agility, flexibility and scalability; (ii) systematics execution; and (iii) addressing both B2C and B2B markets by maximizing speed and consistency.
• Acquisition of AVM will accelerate TdC’s cloud ambition.
• Supported by its own regional extensive fibre network, DC/ cloud operated under an ecosystem which TdC has full control and self-maintained, guaranteeing quality of service towards customers (see Figure #2).
• DC presence in KL, Cyberjaya, Thailand and Vietnam. Utilization is fairly full and planning to expand.
• Already Adopting Edge Computing.
• Continuously exploring opportunities, do not discount the possibility of entering Indonesian market or even spinning off DC as a REIT.

Mr Kang Yew Jin, PLUS CTO

• PLUS has legacy servers which was on premise and no longer under warranty. Now, 90% on multi-cloud after 2-3 years of migration.
• PLUS has 5 clusters of applications in Azure and over 250 virtual machines and over 100 databases.
• Continue to leverage the cloud for the following benefits: (i) economic benefits – reduced cost and better handling of capacity; (ii) move from capex to opex model; and (iii) agility (see Figure #3).
• Critical applications that require cloud elasticity to scale, for example the ability to rapidly scale the IT infrastructure (up or down) to match changing requirements.
• Utilization of cloud innovative services, for example “security as a service”, “backup as a service”, “disaster recovery as a service”, “machine learning as a service” etc., decreases the need for specialized in house IT skills and can free up internal resources for other priorities.
• Pay as You Go Vs. Install and Own. (opex Vs Capex).
• Automatic, timely vendor updates to software to keep software and infrastructure up to date on features and security patches.
• Not all PLUS applications utilize SaaS or PaaS nor do they require such cloud flexibility or scalability. Applications without such need can actually remain on premise of at a local cloud p

Mr Rafiq Razali, Media Prima Group MD

• Covid-19 accelerated remote production and virtualisation, which pushed media companies to adopt cloud-operating models. According to International Association of Broadcasting Manufacturers’ (IABM) latest data, cloud computing represents the fastest growing category of investment for media companies.
• Media Prima (MPR) started implementing cloud infrastructure in 2016 to drive growth in the digital business. In 2018, Media Prima expanded the usage of cloud computing across to traditional platforms such as TV and radio by implementing a modular-based framework with reusable components across brands. In 2020, the company started adopting emerging technologies including server-less and edge computing (see Figure #4).
• Since the adoption of cloud computing technology, Media Prima has witnessed the following benefits: i. Office productivity software cost reduced by 60%; ii. More collaboration in the virtual space even before the pandemic which allows the company to streamline a lot of processes, unifying sales team and reducing tedious paperwork; iii. When the pandemic hit, MPR was well equipped and ready to deploy a virtual working environment for all the staff; iv. Less maintenance and reduced downtime (the technology always works, i.e. 99.995% uptime); and v. Better security on systems from malicious attacks
• An example of the application of cloud computing for MPR is the use of cloud production during the pandemic. With a reduced workforce in the office during the pandemic, MPR needs to ensure the continuity of its news production. In the past, news content needs to be delivered from off-site by the journalists to the on premise hardware to be processed by the production staff. With cloud production, the production and editing happens on the cloud. This allows the production and news team to (i) work from anywhere; as well as (ii) reduce the time to market (as the content delivery from the journalists to the backend production team no longer requires physical delivery). Futhermore, this also allows the same content file to be edited simultaneously by other teams into short clips and snippets that can be uploaded to different platforms (e.g. Facebook, Tik Tok, YouTube etc.) within a short time.
• Another example of the application is in customer analytics where cloud computing allows MPR to store a myriad of data including online and offline data to cloud. The data can be retrieved and processed in an efficient and organized manner by the data analytics team. The more organized data storage and the streamlining of the data analytics processes allows MPR to analyze audience and customer behavior as well as the interaction of data between different platforms (e.g. TV, radio, home shopping etc.) in an efficient manner. The use of the data allows MPR to work better with advertisers by targeting relevant ads to relevant audience.

Conclusion. With so many advantages over on-premise infrastructure, cloud adoption is rapidly rising and expected to the norm going forward. For exposure, both TM (BUY, TP: RM7.93) and TdC (BUY, TP: RM5.61) are leading data centre and cloud service providers in Malaysia. For telco sector, we maintain NEUTRAL and reiterate our emphasis on fixed over mobile as they are the prime beneficiaries in broadband/5G infrastructure deployment. Our top picks are:

TM (BUY, TP: RM7.93). We are particularly positive on its cost optimization measures which is now yielding an impactful outcome. Leveraging on its extensive fibre reach, TM is perceived to be the critical fundamental building block of government’s 5G rollout under MyDigital initiative. Furthermore, TM is well positioned as the sole Malaysian Cloud Service Provider when sovereignty is the utmost important in dealing with government’s data.

TdC (BUY, TP: RM5.61). We like TdC as its retail is gaining momentum on the back of reach expansion and undisputable high value products. Also, data centre is expanding resiliently as IT outsourcing, cloud computing and virtualization are widely adopted. GBS is no longer a drag and expected to perform better as demand recovers. For media sector, we maintain NEUTRAL (with a positive bias). We anticipate a recovery in adex as business activities pick up. Other segments such as newsprint, radio, events and out-of-home advertising will also recover following the easing of movement restrictions.

Media Prima (BUY, TP: RM0.61). We like Media Prima as we believe the future growth of the company is multi-pronged underpinned by the improved performance from its advertising revenue, the positive contribution from its home shopping segment and the growth in content sales and distribution. Its diverse revenue base allows the company to weather through business cycles that affect any particular segment.

Source: Hong Leong Investment Bank Research - 14 Dec 2021