[RAM] RAM Ratings raises outlook on TIME dotCom's AA2 sukuk rating to positive

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.


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Davinder Kaur Gill
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