Published on 23 Jun 2020.
RAM Ratings has upgraded the rating of TIME dotCom Berhad’s (TIME or the Group) RM1 bil Islamic MTN Programme (2015/2035) to AA2, from AA3. Concurrently, the rating outlook has been revised to stable, from positive.
The rating upgrade reflects the sustained improvement in the Group’s performance despite a competitive industry landscape. The better showing has in turn translated into a stellar financial profile. TIME’s top line hit a new high of RM1.11 bil in FY Dec 2019 (FY Dec 2018: RM0.98 bil) while its profitability and debt-protection metrics continued trending upwards.
Although moderating earnings growth is a characteristic of the telecommunication industry, TIME registered an admirable three-year compound annual growth rate of 13.2% for its top line and 19.1% for its adjusted pre-MFRS 16 operating profit before depreciation, interest and tax. This is attributable to the Group’s ability to offer competitively priced products and digital solutions, superior and consistent network quality, a wide range of customisable enterprise solutions, and higher-speed fixed-broadband packages for residential customers. “TIME’s clear market segmentation and business strategies have allowed it to develop a niche and expand its share of the Malaysian fixed-broadband segment,” highlights Davinder Kaur Gill, RAM’s co-head of Infrastructure & Utilities Ratings.
Meanwhile, TIME also benefits from the regional digital transformation wave through its data centre and international bandwidth businesses. This is anticipated to expand its more profitable wholesale and enterprise divisions. Going forward, we expect these segments to remain the cornerstone of TIME’s revenue and earnings. The Group’s retail segment is expected to maintain its growth momentum as it continues extending its fibre footprint in major residential high-rise buildings in the Klang Valley.
TIME boasts a superior financial profile relative to its industry peers. Despite its capital-intensive business, the Group has been generating free operating cashflow in the last five years. A minimal debt load against healthy cash reserves underpins its consistent net cash position. Despite our assumptions of moderating growth prospects and heftier capital expenditure, TIME’s credit metrics are anticipated to stay intact.
The rating is nevertheless constrained by TIME’s limited scale in the fixed-line arena. While the Group has been enjoying an unprecedented uptrend in earnings, its rival, Telekom Malaysia Berhad is still the dominant player given its edge in nationwide network coverage and customer reach. The threats of obsolescence and rapidly evolving technology also pose long-term risks to TIME. Although there is limited clarity on the rollout of 5G as well as the Government’s commercialisation plan and strategy at this juncture, fixed broadband may become obsolete if 5G enables cellular players to offer substantially greater speeds and connectivity at lower prices. While we expect a more staggered rollout of this new technology, we remain vigilant on developments on this front and the eventual impact on fixed broadband telephony.
Chu Jia Ying
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Ratings on TIME dotCom Berhad