Time’s  9M14 results  were  broadly in line  as  9M  revenue grew strongly on  the  back  of  higher  global  bandwidth  sales  and  better  contribution from its data and data centre  business.  Maintain NEUTRAL and a DCFbased  TP  of  MYR5.20  (1%  downside).  Time  announced  its  land acquisition  for  a  new  data  centre  last  week,  in  line  with  its  future expansion plans. We keep our earnings forecasts unchanged for now.

Results in line.  Time dotCom’s  (Time)  9M14 core PBT of MYR101.5m (+15.5% YoY), excluding dividend income from DiGi (DIGI MK, BUY,  TP: MYR6.60)  and  a  one-off  reversal  of  a  MYR11.0m  provision  made pursuant to the settlement of a dispute with a supplier,  came  in line at 75%  of our/consensus full-year estimates respectively. 9M revenue rose 9.8% YoY on the back of higher global bandwidth sales as well as higher revenue  from  data  (+12.7%  YoY)  and  data  centre  business  (+12.8% YoY).  Nonetheless, we note that revenue declined 3% sequentially dueto the lumpy recognition of global bandwidth sales  (2Q14:  MYR21m vs3Q14:  MYR13.6m).  3Q14  EBITDA  margin  improved  to  42.3%  (2Q14: 37.4%) due to the higher revenue and reversal .  Excluding the reversal, 3Q14 normalised EBITDA would be 35.1%, slightly lower QoQ.

Expanding  its  presence.  On  18  Nov,  Time  announced  that  it  is proposing to purchase  a 3.1-acre land  parcel  in Dengkil, Sepang. Total consideration for the land is  MYR15.0m, which will be funded internally.The  land  will  provide  Time  with  the  ability  to  build  a  new  data  centre. Given its proximity to Cyberjaya, we are positive on  the prospects of the new  data  centre.  However,  we  believe  that it  will  be  some time  before the new data centre  is  operational, and  as such  it  is  unlikely to have an impact on our present earnings forecasts.

Forecasts.  We  make  no  changes  to  our  FY14-15  earnings  forecasts, pending a briefing later. However, we  take  this opportunity to introduce our FY16 figures.

Maintain NEUTRAL. We maintain our DCF-derived TP  of MYR5.20. We still  like  Time  as  a  direct  play  to  strong  demand  for  international bandwidth.  We  see  M&As  as  a  potential  re-rating  catalyst  that management is still exploring, but there is a lack of clarity on when this may materialise. This report marks transfer of coverage to Alia Arwina.

Source: RHB