UOBKH Research expects the telecommunications firm to replenish the loss of revenue from the sale of its 70% stake in AIMS DC as soon as between 18 months and 24 months.
PETALING JAYA: TIME Dotcom Bhd
(TDC), which disposed of its stake in data centre (DC) business AIMS Group for RM2bil, is now focused on growing its core business, including capturing retail and DC opportunities.
UOB Kay Hian (UOBKH) Research expects the telecommunication firm to replenish the loss of revenue from the sale of its 70% stake in AIMS DC as soon as between 18 months and 24 months.
Coming from a recent engagement with TDC, the research house said the sale of AIMS Group is not to be seen as an exit from the DC space.
“On the contrary, the pursuit of Digital Bridge Group Inc as a key partner in AIMS DC is to drive its DC business expansion in Malaysia, Thailand and Vietnam,” UOBKH Research stated in a report.
To note, the divestment of its stake in AIMS Group is part of TDC’s strategic partnership with Digital Bridge Group Inc to accelerate the expansion of AIMS across Asia.
The rationale of the divestment came after a strategic review of its DC business in late-2021, which revealed that there were significant opportunities in underserved markets across Asia.
The research house pointed out that the stake sale of AIMS DC would dilute TDC’s 2023 net profit by 6%.
“This, however, does not take into account the cash proceeds from the stake sale of RM2bil,” the research house added.
Half of the proceeds or RM1bil has been earmarked as a special dividend, with a yield of 11%, while the other RM1bil will be reinvested into the core business, which according to UOBKH Research, will deliver an average return on equity of 11% over 2017 to 2021.
UOBKH Research continues to favour TDC, as it offers a three-year earnings compound annual growth rate (CAGR) of 10%, supported by strong home fibre sales and DC contributions.
“Key growth drivers include higher fibre broadband sign-ups, given a wider fibre footprint and healthy demand from enterprise and over-the-top customers with accelerated cloud adoption,” it noted.
On its retail segment, the research house expects momentum to remain strong and sustainable.
This is as it believes the number of fixed broadband subscribers would continue to grow with the ongoing acceleration of fibre network expansion that will lead to higher household penetration.
“While average revenue per user may be compressed amid price discounts, we believe the 2023 to 2024 topline would be lifted by strong volume-driven growth,” it added.
UOBKH Research expects TDC to continue expanding its home passes by at least 200,000 in 2023, after achieving its 1.2 million premises target in early January 2022.
“We expect management to deliver a commendable three-year earnings CAGR of 10% and a lush 11% special dividend for 2023,” it highlighted.
The research house, which has made no changes to its earnings forecasts for TDC, has maintained a “buy” call on the stock with a target price of RM6.40 per share.
