THE BUZZ
Last Friday, Time dotCom (TDC) reported its 1QFY12 financial
results and its core operating profit
(sans the dividend contribution
from DiGi) came in line with our expectations but was below that of
consensus, making up 26% and 16%
of the respective full-year forecasts. However, if we were to include the
dividend income, core earnings before tax would beat our estimates by constituting 34% of our full-year forecast
and would be in line with consensus.
OUR TAKE
All business segments
grew y-o-y. During 1QFY12, TDC saw
its sequential top-line declining marginally by 2% to RM81.3 mainly owing to
seasonal factors. However, on a y-o-y basis, it grew by some 16% given the
stronger contribution across all its business segments, including: (i)
wholesale: +18% y-o-y, (ii) corporate & government: +13% y-oy, and (iii)
consumer & SME: +22% y-o-y.
Slight compression in
EBITDA margin. As expected, TDC’s EBITDA margin declined to 29% (1QFY11:
32%, 4QFY11: 33%), no thanks by the high installation cost that was frontloaded
from the rollout of Astro IPTV services. Again, we wish to emphasize that the recognition
of revenue from this product will be on a recurring basis and it is expected to
achieve EBITDA breakeven for a typical customer with an ARPU of RM100 after
12-15 months. Thus, its EBITDA margin would gradually improve and normalize
going forward since all the lumpy expenditures have been frontloaded. On the
other hand, its quarterly earnings before tax grew 16% q-o-q (+29% y-o-y) to
RM29.6m, lifted by DiGi’s generous dividend income of RM19.4m.
Financial
contribution from acquirees will come in
from June onwards. Upon completing of the capital repayment and capital
restructuring exercises, TDC was finally able to acquire the related companies,
including Global Transit entities and AIMS group, on 17 May to transform itself
into a regional wholesale service provider.
Maintain BUY,
forecasts and FV under review. We are waiting for the analyst conference
call later today to obtain a clearer picture on the outlook of the acquires before
making any changes to our forecasts. In
the meantime, we put our fair value under review. Note that
since TDC saw a recent sell down
in its share price, the company appears to be trading very cheaply at less than
5x FY12/FY13 PER (after stripping away
its 3.5% stake in DiGi) even before taking into consideration the acquired companies.
Currently, DiGi makes up 78% of TDC’s market value.
Source: OSK
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