• Keep NEUTRAL and TP of MYR5.30, 10% upside. Time dotCom’s 9M22 results were broadly in line with sustained growth from the wholesale and retail segments. Notwithstanding the value accretive divestment of a 70% stake in the data center (DC) business to DigitalBridge announced on 22 Nov, the market may be concerned about the earnings de-consolidation with the muted stock sentiment. Our TP factors in a 0% ESG premium/discount. Prefer TM (T MK, BUY, TP: MYR7.55) for exposure.

• Broadly in line. 3Q/9M22 results were consistent with historical trending at 68-69% of our and consensus estimates with some revenue seasonality expected in the final quarter.

• Trend growth. 9M22 revenue, core EBITDA and adjusted PAT were up 12%, 8% and 7%, with the retail segment (fibre broadband) spearheading growth (+26%), followed by wholesale (+11%) and enterprise (3%). QoQ revenue gained 9% with the benefit of a lumpy non-recurring data and DC sales (one-time charge/installation services) totalling MYR22.2m. Stripping this out, revenue would have grown 3% QoQ, driven by wholesale and retail while enterprise momentum looks to have tapered off. Lower core EBITDA growth QoQ (+6%) relative to revenue growth reflected higher opex during the quarter (network, opex and marketing costs). Higher share of associate contributions supported the core PAT uplift of 11% QoQ.

• DC revenue up 12% in 9M22. DC revenue which includes cloud offerings under subsidiary AVM Cloud grew another 4% QoQ (on a recurring basis) (9M22: +12%). Whilst a pick-up QoQ, expectations are for a stronger ramp- up in billings, especially with the increased co-location demand for its new Phase 1 Cyberjaya DC. Management cautioned against taking a quarterly view of the DC business as underlying demand remains healthy with YTD growth still within trend. With the deconsolidation of the business (including DC in Thailand) in 2H23 to DigitalBridge, there will be a 2-8% earnings impact for FY23F-24F, based on our earlier estimates. We have yet to factor in the divestment pending deal completion.

• Retail/FBB segment should continue to grow in tandem with the expanding footprint and market share gains. TDC typically adds 200,000-250,000 new fibre premised pass pa with the current fibre footprint at 1.3m comprising of multi-dwelling units. There is still potential to take market share, directly via its end-to-end fibre connectivity and indirectly via wholesale arrangements with mobile operators. The latter is still significantly smaller vs the incumbent’s domestic high speed wholesale access business.

Source: RHB Research - 29 Nov 2022