We are turning more bullish with Time dotCom (TDC) as it
morphs into a regional player. We are revising upwards our FY12/FY13 core PBT
forecasts by 43%/40% to RM126.4m/RM164.8m on: (i) including financial contribution from the acquired companies, and
(ii) revising estimated dividend income from DiGi.
All in, we derive a new
sum-of-parts (SOP) FV of RM4.40 vs RM4.25 previously. Maintain BUY, as we
continue to like the stock’s defensive earnings and cheap valuation.
Healthy contributions
from newly-acquired companies.
Following the conference call with management yesterday, we are turning
more bullish on the stock. Firstly, we understand
that if the financials of the acquired companies were consolidated with TDC‟s
for FY11, its headlin revenue, EBITDA and PBT would have risen to RM450m (+43%), RM180m (+45%) and
RM150m (+26%) respectively. We also gather that even after the issuance of
65.9m new TDC shares to fund the acquisitions, the enlarged entity would still
have been in an EPS accretive position in FY11.
Huge appetite for fibre. One of the more apparent
synergetic offerings from the acquisition of Global Transit entities (GTE)
would be the strategic location of its fibre optic cable networks, whereby
TDC‟s Cross Peninsular Cable System (CPCS) serves as the missing link between
Thailand and Singapore, with
GTE providing TDC with a regional and global fibre presence. Based on
our findings, Thailand only has two routes connecting the US, either via (i)
multiple connectivity from Malaysia-Singapore-JapanUS, or (ii) utilizing the
Asia-America Gateway submarine fibre cable system directly from Thailand to US.
We think TDC‟s role as “toll keeper” for procuring bandwidth will grow in importance in the
years ahead given
that the usage of
mobile data in Thailand is beginning to pick up. Currently, as internet
traffic from Indochina (broadband penetration of less than 10%) is routed via
Thailand to the US, the traffic from both countries should increase going
forward, which will benefit TDC further.
Even hungrier for
data. As for the inclusion of AIMS data centers, we see strong recurring
revenue from this business, which
will provide TDC with an entirely new income stream. For the
foreseeable future, we see cloud computing gaining in popularity and benefiting
data centers as service providers would look to park their data obligations with
providers such as AIMS. However, we estimate that AIMS currently has 28k sq ft
of net floor space, which is almost fully utilized. Management is aware of
this and is actively looking for areas
for expansion.
Source: OSK
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