Kenanga Research expects Time’s associate AIMS to expedite its expansion to new Asean markets.
PETALING JAYA: TIME Dotcom Bhd
is well-positioned to capitalise on the soaring Internet traffic and data transmission driven by new artificial intelligence (AI) data centres (DCs) in Malaysia, says Kenanga Research.
“Looking ahead, we believe generative AI will drive the next stage of growth.
“Enterprises are amassing vast volumes of data for AI model training and inference.
“These data sets are hosted in DCs that are rapidly proliferating in Malaysia,” the research house noted.
According to analytics platform DCByte, DC capacity in Malaysia is forecast to surge 11-fold from 280MW in the first quarter of 2024 to more than 3.2GW by 2028.
Against this influx of DCs and Internet traffic, the research house expected robust demand for Time’s global and terrestrial bandwidth services, supported by its extensive network of submarine cables and fibre optics.
Kenanga Research also expected Time’s associate AIMS, which owns and operates DCs, to expedite its expansion to new Asean markets.
This will enabling the company to ride on the region’s thriving co-location market, especially amid tighter regulations on local data storage and residency.
“The icing on the cake is higher demand for cloud services by local enterprises undergoing digital transformation, benefitting Time as one of the largest local cloud service providers,” said the research house.
As a result, Malaysia’s public cloud market is projected to reach US$5bil in 2029, implying a compound annual growth rate of 22% in 2023-2029.
“Against this backdrop, we forecast revenue growth of 2%-9% for Time’s cloud segment in the financial year 2024 (FY24)-FY25, which accounts for 11% of the first nine-month of FY24 topline,” it added.
Kenanga Research pointed out that Time holds a competitive edge over smaller players by offering end-to-end solutions integrated with its existing infrastructure such as submarine cables, fibre optics trunk, landing stations and DCs.
Hence, the research house initiated coverage on Time with an “outperform”’ call and a target price of RM5.91 per share.
It said its valuation implies a modest premium to its historical average of 12.2 times, representing an 18% discount to Singapore Telecommunications Ltd’s 15.2 times.
This takes into account Time’s smaller market capitalisation as well as a premium to Kenanga Research’s seven times target multiple for Telekom Malaysia Bhd.
“(This) reflects Time’s regional DC exposure, higher earnings before interest, taxes, depreciation and amortisation (Ebitda) margins and lower regulatory risk on retail broadband, given its smaller market share,” it noted.
The research house also highlighted that Time has emerged as a value play, supported by multiple growth catalysts and an 18% retracement in its share price from its recent peak in February 2024.
However, concerns remain about Time’s ability to bridge the earnings gap following reduced contributions from AIMS.
“We attribute this weakness to the (market) perception that Time lacks dividend and earnings growth catalysts, following the disposal of a 70% stake in its crown jewel, AIMS.
“However, we believe these factors are largely reflected in its current forward enterprise value/Ebitda valuation of 10.3 times, which represents an 20% discount to the 12.8 times multiple prior to AIMS’ deconsolidation in May 2023.”
