We downgrade Time to NEUTRAL (from Buy) with a revised MYR6.75 TP(from MYR6.60, 4% upside). We remain positive on its prospects due to the direct exposure from data consumption growth. Time’s healthy balance sheet and recent MYR1bn sukuk facility could also drive itsregional aspirations. That said, the company’s YTD share price outperformance has largely reflected this. Revisit at lower levels.

YTD telco sector outperformer. Time dotCom’s (Time) share price continues to show strong resilience as it has outperformed its peers by 36-63%. We believe that Time’s share price has held up well as it is a direct beneficiary of the strengthening of the USD. This stems from its global bandwidth sales.

Growth prospects still intact. Based on our checks with management,Time’s three new submarine cables, ie the Asia-Pacific Gateway (APG), FASTER and Asia-Africa-Europe 1 (AAE-1), are on track for commissioning in FY16 and FY17 with 70-80% copletion. While bandwidth prices could come under pressure as regional bandwidth capacity continues to expand, we believe the insatiable appetite for mobile data should keep bandwidth demand buoyant in the medium term. Meanwhile, Time’s East-to- West connectivity should provide an edge over its peers. We have also highlighted in our report dated 29Sep: IoT – Staying Connected At All Times that the company would be a key beneficiary of the potential surge in data consumption throughout the region going forward. Meanwhile, its proposed MYR1bn Islamic MediumTerm Note (MTN)/sukuk facility should help beef up Time’s war chest for potential regional M&As as well as defraying its capex.

Earnings forecasts. We raise our FY15-17 earnings forecasts slightly by 1.4-3.6% after revising our USD/MYR assumptions to MYR4.00-4.20(from MYR3.80). This is to be in line with our house view.

Downgrade to NEUTRAL. Our DCF-derived TP is raised to MYR6.75 (from MYR6.60) after updating our forex assumptions. Despite the higher TP, we downgrade Time to NEUTRAL (from Buy) as we see its continuous outperformance has largely reflected its longer-term growth prospects. That said, we believe future re-rating catalysts could come from more M&As as it seeks to expand its regional footprint.