• 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