Timedotcom announced the disposal of its 49.9m shares in Digi for MYR310.9m. Maintain NEUTRAL, with our TP revised to MYR6.20 (0.8% upside). The proceeds from the disposal will be used to boost up its war chest, which we believe is timely given that Time will be capexintensive over the next one to two years. Time’s next re-rating catalyst will be the commission of its new cables from 2HFY16 onwards.

Disposing off its stake in Digi. TimedotCom (Time) announced that it has completed the disposal of 49.9m shares representing a 0.64% stake in Digi (DIGI MK, NEUTRAL, TP: MYR6.60), via a placement at a price of MYR6.23 per Digi share. The disposal has resulted in a net gain of MYR202.1m, and the proceeds will be used for working capital purposes. Post-disposal, Time will be left with about 68.5m Digi shares, which we estimate could still result in a total dividend income of about MYR14m for the year. Time also announced the proposal of a share option grant to its CEO to subscribe up to 17.2m new shares in Time, representing 3% of Time’s existing issued and paid-up share capital. The company expects this to be completed by 3Q15.

Unlocking the value of non-core assets. We believe that the timing is right for the disposal, as this has allowed the company to boost up its war chest. Time will be capex-intensive over the next one to two years leading up to the commissioning of its three new cables (APG, AAE-1 and Faster). Note that the extra funding could also be used to upgrade its UNITY cable’s capacity at an estimated cost of USD300,000-400,000, given that UNITY is almost approaching full utilisation. FY15 growth will continue to be underpinned by the increasing local demand for LTE network rollouts, specifically that of Digi, which has front-loaded its LTE targeted number of sites and as such will need to fiberise these sites.

Earnings forecasts. No changes to our earnings forecasts as we have previously excluded the income from Digi in our core profit calculations.

Maintain NEUTRAL. Our DCF-based TP is lifted to MYR6.20 (from MYR5.40) after making adjustments to our working capital and revisingour WACC to 7.2% (from 7.4%) as we were too conservative about our previous valuation. We reiterate that Time’s future re-rating catalysts will come from the commission of its new cables, although regulatory delays remain a key risk for the commissioning of the new cables.