KUALA LUMPUR: CIMB Securities Sdn Bhd has upgraded Time dotCom Bhd to “Buy”, citing its defensive appeal, attractive dividend yields and potential medium-term value from its 30 per cent stake in data centre operator AIMS.
The research firm said Time dotCom’s dividend yields are expected to remain attractive at 6.7 per cent annually between financial years 2026 and 2028 (FY26-FY28), before normalising to five per cent from FY29.
Time dotCom plans to raise debt to fund capital expenditure and investments, while using operating cash flow to cover maintenance expenditure and financing costs, leaving the balance available for dividends.
“Given this more measured approach, we cut our dividend per share forecasts for FY26-FY28 to 37 sen per annum, from 43 sen previously, and project net debt-to-earnings before interest, taxes, depreciation and amortisation (Ebitda) to rise to 1.2 times by end-FY29,” CIMB Securities said in a note.
The firm expects Time dotCom’s third-quarter pre-tax profit to remain largely stable, declining by up to three per cent quarter-on-quarter but increasing between 12 and 16 per cent year-on-year.
The company is scheduled to release its third-quarter results on Nov 27.
CIMB Securities expects pre-tax profit margins to moderate due to higher equipment costs and marketing expenses.
“This should not come as a negative surprise, as the first-half Ebitda margin was exceptionally high at 47.9 per cent and Time dotCom had guided for Ebitda margin to moderate into the second half during its second-quarter briefing,” it said.
The research firm also lowered its core net profit forecasts for FY27 and FY28 by between one and three per cent to account for higher costs and lower earnings contributions from AIMS.
It expects pre-tax profit to grow by only three per cent year-on-year in FY27 and FY28 as margins come under pressure from higher equipment costs and a shift from capital expenditure to operating expenditure following the company’s migration to a Software-as-a-Service model.
CIMB Securities also lowered its target price for Time dotCom to RM6.05 following revisions to its earnings forecasts and an increase in the risk-free rate assumption to four per cent.