The telecommunications landscape has become increasingly challenging, so it is to Time dotCom Bhd’s credit that it has managed to generate commendable returns to shareholders in recent years, given the upward momentum of its share price and its regular dividends.
The telco’s share price has climbed 21.4% from RM8.96 as at June 30, 2017, to RM10.88 as at June 30, 2020 (adjusted price) — the three-year period of review for The Edge Billion Ringgit Club Corporate Awards.
While that translates into a total annualised return of only 6.7% over the three years, it was ahead of those of its peers. This makes Time dotcom our winner in the telecommunications and media sector.
For the financial year ended Dec 31, 2019 (FY2019), shareholders received a total dividend per share of 29.03 sen, higher than the 20.56 sen in FY2018 and the 17.20 sen in FY2017.
What is interesting is that its share price has continued to climb. It closed at RM13.70 on Nov 30, a gain of 25.9% from RM10.88 on June 30. Time dotcom is one of the few companies that have not been as badly hurt by the Covid-19 pandemic this year — and this is possibly the underlying factor driving its strong share price performance.
Time dotCom provides fibre network solutions supporting home and business needs. Its fibre-optic network assets span Malaysia, Singapore, Thailand, Vietnam and Cambodia.
“The impact of Covid-19 on the group’s business has so far been modest and the impact has mostly been felt from the hospitality, tourism and aviation sectors,” the company said, following the release of its first-half financial results for FY2020.
In 2QFY2020, Time dotCom saw net profit decline 24.6% year on year to RM69.79 million, despite a 9.7% increase in revenue to RM304.8 million.
Nevertheless, for 1HFY2020, net profit grew 7.8% to RM167.75 million on the back of a 10.8% rise in revenue to RM598.75 million. Its core net profit, at RM160 million, was roughly within analysts’ expectations, coming in at 48% of the consensus estimate for the full year.
The higher revenue for 1HFY2020 was a result of higher sales across all core product segments. As at June 30, it had cash and cash equivalents of RM480.2 million, while its total borrowings amounted to RM60.27 million. The telco has yet to declare interim dividends so far this year.
“Owing to the longer-term approach that we’ve always taken towards the business, we’ve been able to continue driving growth for 1H2020. Coverage expansion and service quality remain key priorities for the group as we support our customers in an increasingly digital environment,” its CEO Afzal Abdul Rahim said.
In 1H2020, Time dotCom spent close to RM98 million to improve its domestic network coverage, build a new data centre in Cyberjaya and invest in a new billing system.
Kenanga Research has a “trading buy” call and fair value of RM14 on the stock based on Time dotCom’s resilient and lean business model; growth prospects helmed by increasing demand for internet and data services; and growing regional synergies via its associates.
“We also believe it will not lose out from the eventual deployment of our national 5G, but is likely limited to only the rolling-out of infrastructure,” it says in a Sept 15 report on the company.
In FY2020, Time dotCom aims to enter at least one million household premises, from 790,000 in FY2019, with a fibre broadband footprint mostly encompassing high-rise buildings in the Klang Valley and Penang.
“At present, [its] household packages are the most competitive in the market, based on the respective speeds offered, which we believe gives existing customers little incentive for migration. This puts the group in a favourable position during this Movement Control Order period, in which homebound work arrangements are more prevalent and the need for home internet becomes more pressing, possibly nudging Arpu (average revenue per user) higher,” says Kenanga.