Is Time Dotcom Bhd The Right Telco To Bet On?

Time Dotcom Bhd (Time) is a listed telecommunication services provider based in Malaysia. It owns fibre optic network assets which span across Malaysia, and four other ASEAN nations such as Singapore, Thailand, Vietnam, and Cambodia. Also, Time has four international submarine cable systems and is a leading data centre operator in Malaysia. As of 26 July 2019, Time is valued at RM 5.3 billion in market capitalisation. 

In this article, I’ll share 10 things about Time that you need to know before you invest into it. They are as follows:

• Time’s Main Network Connectivity Asset
  It owns the Cross Peninsular Cable System (CPCS), a fibre optic network that enables Time to offer both broadband and voice services to a huge client base of 600,000 premises across Malaysia. 

Source: Time’s Annual Report 2018


Data revenues had been the key growth driver to Time. It has increased by a CAGR of 17.76%, rising from RM 178.3 million in 2009 to RM 776.6 million in 2018.

It had offsetted a gradual dip in voice revenues from RM 90.0 million in 2009 to RM 68.7 million in 2018.





Source: Time’s Annual Reports

• Data Centres
  Time’s data centre business is run by AIMS Group of Companies (AIMS), a cluster of fully-owned subsidiaries acquired by Time in 2012. Since its inception in 2012, Time has expanded its data centre floor spaces to as much as 74,015 sq. ft. in net lettable area (NLA) located mainly in Kuala Lumpur and Cyberjaya.
  
  Data centre revenue had increased by CAGR of 25.63%, rising from RM 33.6 million in 2012 to RM 132.1 million in 2018.
  
  
  

No.	Location of Data Centres	NLA (Sq. Ft.)
1	Menara AIMS, Kuala Lumpur	52,645
2	Cyberjaya	18,700
3	Others	2,670
Time’s Total NLA of Data Centres	74,015

Source: Time’s Annual Reports

• Financial Results
  Time has achieved a CAGR of 13.24% in group revenues, rising from RM 321.1 million in 2009 to RM 983.4 million in 2018. Its sales increase had been contributed by higher sales from data and data centres during the period. Here, I have adjusted its shareholders’ earnings by excluding its gains or losses arising from:
  
  – Gains / Losses of Disposal of Quoted Investments
  – Voluntary Separation Scheme (VSS) and other compensations (2009).
  – Deferred Tax Benefits
  
  It has grown from RM 56.3 million in 2009 to RM 288.8 million in 2018, thus, is a CAGR of 19.92% in adjusted shareholders’ earnings during the 10-year period.
  
  

Source: Time’s Annual Reports


Its adjusted Return on Equity (ROE) has averaged 7.51% per annum for the last 10 years.

Here, I’ll include Time’s actual reported shareholders’ earnings that are inclusive of multiple one-off, non-recurring and non-business profits or losses during the 10-year period.

Source: Time’s Annual Reports

• Cash Flow Management
  From 2009 to 2018, it had brought in RM 2.38 billion in cash flows from operations and RM 385.5 million in investment income (mostly derived in dividends received from its stakes in Digi.com Bhd – which have been disposed entirely in 2016). Out of which, Time has spent on:
  
  – RM 1.93 billion in net capital expenditures (CAPEX).
  – RM 461.5 million in net repayments of long-term borrowings.
  – RM 770.7 million in dividend payments to its shareholders.
  
  

Source: Time’s Annual Reports

Evidently, Time has built a track record of generating positive cash flow from its operating activities and prefers to allocate a greater proportion of its cash proceeds on CAPEX and sustaining stable dividend payments to reward its shareholders beginning in 2015.

• Balance Sheet Strength
  As of 31 March 2019, Time has reported to have non-current liabilities of RM 361.2 million and shareholders’ equity of RM 2.47 billion. Time’s gearing ratio works out to be 14.61%. In addition, Time has reported as much as RM 718.8 million in current assets and RM 366.8 million worth of current liabilities. Thus, its current ratio is 1.96.
  
  
  
• Management
  As of 19 March 2019, the largest shareholders of Time are as follows:
  
  

No.	Direct Shareholders	Shareholdings (%)
1	Pulau Kapas Ventures Sdn Bhd (PKV)	30.35%
2	Khazanah Nasional Bhd	11.19%
3	Employees Provident Fund Board	10.03%
4	Kumpulan Wang Persaraan (Diperbadankan)	8.56%

As such, Khazanah Nasional Bhd emerges as the largest shareholder of Time with its direct shareholdings and indirect stakes held in PKV. Here, I’ll provide a list of Time’s indirect shareholders who held their interests within PKV. They are as follows:

– Global Transit International Sdn Bhd.
– Megawisra Sdn Bhd
– Megawisra Investments Limited
– Afzal Abdul Rahim
– Patrick Corso

Afzal is appointed as the CEO while Patrick is the COO of Time.

• Latest Product Offerings
  In early October 2018, Time launched its new 1Gbps broadband plan & upgraded its existing plans with faster broadband speed at prices which are affordable. It may result in initial margin compressions in 2019. But, Time has revealed its expectation to cushion this impact with achieving greater sales volume.
  
  

Source: Time.com.my

• P/E Ratio
  In 2018, Time has made earnings per share (EPS) of 49.6 sen. Based on its current stock price of RM 9.15 a share, its current P/E Ratio is 18.45, which is below its 10-year average of 20.63.
  
  

• P/B Ratio
  As of 31 March 2019, Time has reported to have net assets of RM 4.24 per share. Therefore, its current P/B Ratio is 2.16, which is higher than its 10-year average of 1.58.
  
  

• Dividend Yields
  Time has established a dividend policy to pay out a minimum of 25% of its normalised profit after tax to reward its shareholders starting in year 2014. Since then, Time has declared and paid both ordinary and special dividends to reward its shareholders.
  
  Time has paid out 20.56 sen in total dividends per share (DPS). As such, its dividend yield is 2.25%. 

VIA’s Verdict 

Overall, Time has built a track record of growing its sales and profits for the last 10 years. Its ability to generate higher cash flows has enabled Time to declare a string of dividends starting in 2014. As a result, growth in its profits had led to a continuous growth in its stock price. 

Source: Google Finance

The question remains: ‘Would you invest in Time at RM 9.15 today?’ 

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