In a note today, RHB IB said it holds a more bullish outlook on the group’s prospects following a recent visit to the AIMS data centre in Cyberjaya (AIMS @ CJ).
According to its analyst Jeffrey Tan, the renewed optimism is based on Time dotCom’s timely capacity expansion to meet structural demand, the economic importance of data centres, as well as high premiums accorded for infrastructure assets in the new normal.
“We also see continued robust growth for the group’s retail broadband segment, helping to fuel its 11% FY2023-25 forecasted earnings CAGR (compound annual growth rate),” he said.
The research firm also lifted the group’s FY2024-25 core earnings forecast by 3% to 7% after taking into account the broadband segment’s stronger growth and increased share of profits from the data centre.
“Note that the stock’s foreign shareholding level has crept up from under 9% a year ago to about 13% at end-June,” said Tan.
“Time dotCom is slated to announce its second quarter of 2023 and first half of 2023 results on Aug 18,” he said.
Slight risk of data centre glut
RHB IB pointed out there is a concern that the local data centre market may eventually become oversupplied following growing reports of new investments in recent months.
“Based on press announcements made, up to 1 million MW of additional capacity is expected to come on-stream over the next two to three years, with Johor’s Sedenak Technology Park (STP) and Cyberjaya being the two hotspots for new builds,” it mentioned.
However, the research house said the risk appears to be manageable for the time being due to several strong structural drivers at play.
Among those factors are strong demand for cloud services, managed solutions, and disaster recovery services; the common use of phased approaches for upgrades; and Singapore’s stricter data centre build conditions, leading to an overflow of inventory to Malaysia.
Additionally, RHB IB believes that the significant investments made by hyperscalers are advantageous for co-location data centre providers, seen through the pre-committed take-ups in their capacity.
As at 12.27pm, Time dotCom’s share price rose seven sen or 1.31% to RM5.40, giving the group a market capitalisation of RM9.93 billion.