RHB Investment Research Reports

Time Dotcom - Dividend Cheer

rhbinvest
Publish date: Wed, 01 Mar 2023, 11:19 AM
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An official blog in I3investor to publish research reports provided by RHB Research team.

All materials published here are prepared by RHB Investment Bank Bhd. For latest offers on RHB Invest trading products and news, please refer to: http://www.rhbinvest.com

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  • Keep NEUTRAL with a higher MYR5.60 TP from MYR5.30, 5% upside and c.4% yield. Time dotCom’s results were in line, with growth in wholesale and retail keeping up. Proactive capital management will see another 14.7 sen DPS/share paid in March (c.5% yield). While the divestment of its data center (DC) business is value accretive, we see medium-term earnings dilution. Prefer Telekom Malaysia (T MK, BUY, TP: MYR5.90) for exposure.
  • In line; stellar DPS. FY22 results were in line, at 1-3% ahead of our/consensus’ forecasts. Revenue and core EBITDA were up 13% and 9% YTD (QoQ: +4% and +11%) with the benefit of tax savings in 4Q22 lifting core earnings by a larger 40% QoQ and 27% YoY (FY22: +13%). A second interim and special DPS of 12.33 sen/share and 2.36 sen/share respectively have been declared (payable on 24 Mar), bringing full year DPS to 31.03 sen/share (133% payout), beating both our and market estimates.
  • Retail still leading the way, with wholesale momentum improving. The retail segment (fiber broadband) continued to spearhead recurring revenue growth (+25%), followed by wholesale (+10%), and enterprise (3%). While revenue ticked-up 4% QoQ, EBIT narrowed 14% from higher depreciation expense (higher DC investments). Share of associates was down 15% QoQ (flat YTD).
  • DC revenue up 2% YoY in 4Q22 and 16% in FY22. DC revenue (including cloud offerings) climbed another 4% QoQ (on a recurring basis) with the increased co-location demands for its new Phase 1 Cyberjaya DC (60,000 sq ft). YTD recurring DC sales rose 10% (21% of revenue). We estimate a 2-8% earnings impact in FY23-24 from the divestment of the DC business to Digital Bridge (announced last November). Our forecast has yet to adjust for the sale, pending deal completion in 2Q23.
  • Retail/fixed broadband segment should continue to grow in tandem with the expanding footprint, supported by speed upgrades and targeted offerings. We expect TDC to add 200k-300k new fiber premises pass in FY23F (currently c.1.3m). This should be backed by Phase 2 of the national digital infrastructure plan (JENDELA) which has a target of 9.0m fiber premises by 2025 (2022: 7.5m). Upgrades to higher speed plans should mitigate APRU pressure from the higher take-up of entry level plans and targeted B40 offerings (policy-induced), in our view.
  • Forecast and risks. Post results, our FY23-25F core earnings are adjusted by -1% to +3% with FY25F introduced. Our TP is lifted after rolling forward our base year forecast with a 0% ESG premium incorporated. Key downside risks are FBB competition, weaker than expected earnings/margin and higher than expected capex with upside risks being stronger than expected earnings and dividends.

Source: RHB Research - 1 Mar 2023

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