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RAM Ratings reaffirms TIME dotCom’s AA2 sukuk rating

Published on 13 Aug 2021.

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RAM Ratings has reaffirmed the rating of TIME dotCom Berhad’s (TIME or the Group) RM1 bil Islamic MTN Programme (2015/2035) at AA2/Stable. The reaffirmation is premised on TIME’s solid operational performance and resilient financial metrics. TIME continues to offer competitively priced products and digital solutions, with superior and consistent network quality, despite a competitive industry environment. This coupled with a strategic approach focusing on high-density, high-rise buildings has enabled the Group to yield better margins and enlarge its customer base quicker.

TIME benefits from data centre demand, given the shift towards digitalisation amid the pandemic. The Group’s international bandwidth and more recent cloud computing services via its 60%-owned AVM Cloud Sdn Bhd – acquired early this year – also give it an edge. The ongoing regional digital transformation wave and the government’s strong push for a digital economy are anticipated to expand TIME’s more profitable wholesale and enterprise divisions. The Group’s retail customer segment has gained traction, its performance further boosted by the new norms of remote working and online learning. We expect the growth momentum to persist as TIME steps up its fibre coverage at major residential high-rise buildings in Klang Valley.

In an effort to become a regional data centre player, the Group is actively expanding this segment. The completion of AIMS @ Cyberjaya would add another 60,000 sq ft to its data centre space, catering for the growing demand. However, TIME must contend with stiffer competition as the government welcomes the entry of hyperscalers to build and manage data centres and provide hybrid cloud services. Pending further clarification, we view this as a medium to long-term risk to TIME’s data centre operations. 

Boasting a superior financial profile relative to industry peers, the Group maintained the uptrend in its earnings in FY Dec 2020. Revenue and operating profit before depreciation, interest and tax (OPBDIT, excluding other operating income and investment income) for the year jumped a respective 9.8% and 18.2% to RM1,223.2 mil and RM566.5 mil. TIME saw its OPBDIT climb another 10.4% (annualised) to RM156.4 mil in 1Q FY Dec 2021 on account of a fresh contribution from AVM Cloud and strong fundamentals. Its lean operating cost structure has consistently translated into an admirable OPBDIT margin of over 40% since FY Dec 2018.

The Group has generated positive free operating cashflow in the last five years, notwithstanding its capital-intensive business. A minimal debt load against healthy cash reserves underpins its consistent net cash position. While industry prospects are healthy, our stressed cashflow assumption incorporates more moderate revenue growth and heftier capital expenditure as well as other investment needs in the medium term, following which TIME’s credit metrics are anticipated to stay intact.

Constraining the sukuk rating is the Group’s still small market shares compared to the incumbent domestic operator. Any upside to the rating is contingent on TIME significantly boosting its fixed-broadband market position domestically and building a meaningful regional presence.

The evolving technological landscape might present a risk to the Group. The rollout of the 5G network may hinder demand for fixed broadband in the longer term if cellular players are able to offer greater speed and connectivity at lower prices. Overall, we do not expect the criticality of the fibre network to be impacted overnight.  

 

Analytical contacts
Chu Jia Ying
(603) 3385 2519
jiaying@ram.com.my

Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2021 by RAM Rating Services Berhad



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