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RAM Ratings raises outlook on TIME dotCom’s AA2 sukuk rating to positive
Published on 20 Nov 2024.
RAM Ratings has raised the outlook on the long-term rating of TIME dotCom Berhad’s (TIME or the Group) RM1 bil Islamic Medium-Term Notes Programme (2017/2037) to positive from stable. The AA2 rating has been affirmed.
The positive outlook reflects TIME’s sustained superior financial metrics and steady business expansion. Demand for connectivity and digitalisation will rise in tandem with the proliferation of data-driven industries and 5G adoption, providing the impetus for TIME’s future growth. Notwithstanding the divestment of a majority stake in its data centre business, TIME’s earnings and cashflow generation continued to strengthen, supported by steady business growth in its key markets. Proceeds from the disposal lifted cash reserves significantly, boosting TIME’s already robust liquidity profile. As at end-June 2024, cash reserves stood at RM1.4 bil, dwarfing the Group’s debt load of RM79 mil (including lease liabilities). TIME has been in a net cash position since 2014.
TIME’s niche as a fixed broadband provider for high-rises in urban areas has allowed it to command higher margins than peers. In FY Dec 2023, the Group’s revenue and operating profit before depreciation, interest and tax excluding one-off items rose amid higher demand for data connectivity, particularly from the retail segment. Despite its smaller stature compared to Telekom Malaysia Berhad – its largest competitor – industry prospects remain rosy for players in the fixed line broadband, data and cloud computing sectors.
The Group hopes to expand its fixed line broadband coverage in smaller cities, which could entail increased capital expenditure (capex). Despite its capital-intensive business, TIME can cover capex with internally generated funds, reflecting its robust financial metrics which remain better than its rating peer group. Our stressed cashflow analysis indicates that TIME’s funds from operations debt coverage and gearing in the near-term will stay robust at 5.17 and 0.03 times, respectively.
The technological landscape for the communications sector continues to evolve – underscoring the need for telco players to remain relevant and maintain sticky value propositions. The nationwide rollout of 5G mobile networks, for example, could hinder demand for retail fixed broadband in favour of mobile broadband if cellular players are able to offer greater speed and connectivity at lower prices. We view this to be a longer-term risk, and do not expect the criticality of TIME’s fibre network to be impacted overnight. The potential rating upgrade hinges on TIME’s ability to sustain its superior credit metrics and earnings growth.
Analytical contacts
Lee Yee Von
(603) 3385 2503
yeevon@ram.com.my
Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@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
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