Despite cut-throat competition, tighter regulation and many other challenges over the last few years, not least of which is the Covid-19 pandemic, Time dotCom Bhd (TDC) continues to deliver commendable earnings and returns to shareholders. Notably, it was one of very few companies to reward investors with a higher dividend last year, amid the coronavirus gloom.
The broadband provider chalked up 4.5% growth in net profit to RM328 million for the financial year ended Dec 31, 2020, (FY2020) from RM314 million in FY2019, despite various setbacks as a result of the Covid-19 lockdowns.
This was achieved mainly through its efforts to meet the growing demand for broadband and internet connectivity as customers adapted to the new normal of working and studying from home. Revenue that year grew 10% to RM1.22 billion as all its products, except for the voice segment, posted an increase in revenue. In FY2018, it turned in a net profit of RM288.7 million and, in FY2017, RM175.4 million.
Over FY2017 to FY2020, the three-year period under review for The Edge Billion Ringgit Club Corporate Awards, TDC’s earnings grew at a compound annual growth rate (CAGR) of 23.2% — the best among its peers. This makes it our winner for highest growth in profit after tax over three years in the telecommunications and media sector.
TDC also clinched the award for highest returns to shareholders, delivering a CAGR of 22.9% for the three-year review period between March 30, 2018 and March 31, 2021, thanks to a strong run in its share price and regular dividends.
Its (adjusted) share price climbed 71% from RM2.79 as at March 30, 2018 to RM4.77 as at March 31, 2021. Shortly after the country went into its first lockdown on March 18 last year, the stock slumped to a low of RM2.97 (March 20) but thereafter moved up in a broad upward trend, gaining a solid 60.6% as at our awards cut-off date of March 31, 2021. From there, it went on to peak at RM4.83 on April 1 and 2, before tapering off. The company earlier this year announced a two-for-one bonus issue involving 1.21 billion new shares, which went ex on Aug 4.
The telco’s total dividend per share (DPS), which included a special dividend in each of the years under review, came in at 20.56 sen in FY2018, 29.03 sen in FY2019 and 33.10 sen in FY2020.
The DPS of 33.10 sen in FY2020, of which 20.6 sen comprised a special dividend, was remarkable, considering that many other companies had taken a conservative stance and held back dividends, given uncertainty over how long the pandemic might last.
The ordinary dividend was consistent with TDC’s policy to pay shareholders up to 25% of normalised profit after tax, while the special dividend was meant to reward shareholders for their loyalty and support in trying times.
It remains to be seen whether TDC will continue to be as generous. One recent concern is that it may be subject to a so-called “prosperity tax”, a one-off tax measure introduced by the government under Budget 2022, whereby corporates earning above the RM100 million mark will be taxed at a rate of 33% instead of the blanket 24% previously. TDC’s share price sank 4.6% to RM4.31 on Nov 1, the first trading day after the tax was announced, giving it a market capitalisation of RM7.87 billion.
The company is, nevertheless, in a sweet spot to benefit from continuous expansion of the home fibre footprint via the government’s Jendela (Jalinan Digital Negara) initiative, aimed at improving broadband coverage in the country. Despite extended lockdowns this year, the company is on track to meet its 1.2 million premises pass target by year-end.
In 9MFY2021, TDC’s net profit rose 21.8% to RM284.57 million and it declared a special interim DPS of 8.22 sen. “We expect the full-year DPS to hover around 12 sen (or around 60% of earnings payout) in line with the historical payout level,” UOB Kay Hian Research said in a Nov 29 report. It had a “buy” call and a RM4.80 target price on the stock.