• BUY, new DCF-based MYR5.30 TP from MYR5.00, 14% upside with c.5% FY22F yield. We believe Time dotCom’s recent brand revitalisation should drive stronger customer affinity with fibre broadband (FBB) deemed an essential utility post pandemic. We see a progressive ramp-up in data centre (DC) revenues (now <15% of revenue) from FY23F onwards. TDC is a preferred sector pick, due to its strong track record of commercial and earnings execution and net cash balance sheet. This apolitical stock is also a strategic proxy to the secular growth in the telco infrastructure space.

• Fast, really fast (and fun). TDC hired renowned local graffiti artist Loo Lok Chern (popularly known as Cloakwork) for its recent brand revitalisation exercise, which saw new marketing and communication visuals trumping its cheeky, bold and fun persona. The new identity was unveiled together with the launch of its 2Gbps FBB service, the fastest in the market. We see the brand refresh driving stronger consumer affinity and product differentiation, with the FBB segment still the key revenue growth driver (1HFY22: +25% YoY). The recent access agreement inked with U Mobile should further strengthen TDCs’ wholesale business, which still yields the highest margin within the group.

• Second phase of AIMS@CJ in the works along with downtown DC expansion. Phase 2 infrastructure works at its purposed-built Cyberjaya DC has started and should be completed by end-2023. The expansion will double the existing capacity of 60,000 sq ft under Phase 1 (commissioned in 3Q21) where >70% of white space capacity has been utilised. AIMS@CJ DC has a design capacity of up to 50MW which appeals to the likes of hyperscalers and over-the-top (OTT) companies. We gather from management that commitments have also been secured from existing and new customers for the upcoming second downtown DC (previously Bangunan KWSP). Rectification and upgrading works are underway, with a single floor (8,000-10,000sq ft/1MW) to be ready for service in 1Q23. The 13-storey commercial building, acquired for MYR62m in January, should ease capacity constraints at the adjacent Menara AIMS, with 60,000 sq ft of floor space to be commissioned in phases. DCs located in the prime central business district continue to be well sought after. Here, Menara AIMS offers the widest peering options for customers, given its unparalleled connectivity with all domestic telcos and 80% of foreign-based carriers.

• Forecast adjustments and risks. We raise FY22-24F core earnings by 1- 3% to factor in incrementally stronger DC billings from AIMS@CJ Phase 1. Key downside risks are weaker than expected margins and earnings, and retail FBB competition. Our TP has baked in a parity ESG premium, based on our in-house methodology.

Source: RHB Research - 17 Nov 2022