TdC’s FY21 core net profit of RM382m (+5% YoY) matched expectations. It has adopted a new dividend policy to pay an annual dividend up to 50% (previously 25%) of normalised PAT. All products expanded YoY and yielded higher core earnings thanks to efficiency gains despite higher D&A. Data Centre growth (+87% YoY) was due to AVM consolidation since mid-Jan 2021. Regional associates contributed a total of RM24m (+33% YoY) in FY21. AIMS data centre in Cyberjaya is completed solidifying its strategic position and contribute to medium-term growth. Reiterate BUY with lower SOP-derived TP of RM5.37.

Within expectations. 4Q21 core PAT of RM106m (+9% QoQ, -5% YoY) brought FY21’s total to RM382m (+5% YoY) which was in line, accounting for 99% and 102% of our and street full year estimates, respectively. FY21 one-off adjustments include net bad debt recovered (-RM2m), forex gain (-RM19m), doubtful debts (+RM7m), PPE disposal gain (+RM85k), PPE written off (+RM232k), net impairment for construction cost (+RM3m) and reversal of over-provision for financial guarantee (-RM1m).

Dividend. Declared an ordinary interim and special interim tax exempt (single tier) DPS of 10.86 sen and 2.29 sen (4Q20: 4.17 sen and 8.67 sen), respectively. Both going ex on 14 Mar. FY21 DPS amounted to 21.37 sen vs. FY20’s 11.03 sen. The board also announced that TdC has adopted a new dividend policy to pay an annual dividend up to 50% (previously 25%) of normalised PAT provided that such distribution will not detrimental to the group after taking into account its working capital needs as well as long term capital requirements.

QoQ. Top line increased by 7% as the expansions in Data (+2%) and Data Centre (+28%) while Voice was flat. Excluding one-off non-recurring revenue, turnover growth was lower at 3% as Data Centre was boosted by one-off contracts worth RM13m. In turn, core net profit strengthened by 9% aided by lower effective corporate tax rate of 23.8% vs 3Q21’s 25.8%.

YoY. Turnover grew 18% supported by higher contributions from Data (+5%) and Data Centre (+117%), more than sufficient to offset Voice contraction (-22%). Data centre strength was due to AVM consolidation since mid-Jan 2021. However, core PATAMI was 5% lower attributable to higher D&A (+7%) and higher corporate tax rate (4Q20: 14.7%).

YTD. For the same reasons above, revenue and core earnings were higher by 14% and 5%, respectively. In terms of revenue breakdown: Voice (-6%), Data (+5%) and Data Centre (+87%).

Regional associates. CMC (Vietnam) and Symphony (Thailand) were profitable and contributed RM24m (+33% YoY) to FY21’s bottom line.

Outlook. It looks forward to the upcoming launch of data centre facility in Cyberjaya that is expected to contribute to future medium -term revenue growth and its plans to establish itself as key regional data centre players.

Forecast. Unchanged as results was in line. Reiterate BUY although we lowered SOP-derived TP from RM5.61 to RM5.37 (see Figure #2) with WACC of 8.2% (previously 8.0%) and TG of 1.5% for domestic telco business. 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.

Source: Hong Leong Investment Bank Research - 28 Feb 2022