Timecom ... Dec10

News

- Astro and Time DotCom (TDC) have entered into a principal terms of collaboration for the provision of IPTV and Broadband services.

- Astro will deploy its HD/VOD/B.yond pay-TV service, branded "Astro" and "Powered by TIME Fibre Broadband", on TDC's fibre Broadband Infrastructure.

- The service will be immediately available to 11,400 homes and be extended to 167,000 homes in over 1,500 buildings across the Klang Valley and Penang by end December 2011.

- Astro and TDC agree to enter into the collaboration agreement for a period of 10 years by 31 January 2010.

Financial impact

- Should the collaboration agreement take place in 2011, Astro would be able to offer IPTV bundled with TDC’s fiber broadband and telephony services.

- TDC is expected to benefit from higher earnings due to the increased utilisation of its existing fiber network.

Pros / Cons

- The news reinforces our views for TDC’s growth prospects and its ability to leverage on increasing the utilization of its fiber network.

Risks

- Irrational wholesale pricing and competition, new fiber rollouts, government regulations and a contraction in demand for wholesale bandwidth

Rating BUY (TP: RM0.89 )

- Positives – The company is entering into a multi-year growth cycle with a high degree of operating leverage. By tapping into new growth areas such as global bandwidth and node

fiberisation as well as proposing a series of synergistic acquisitions, the company is poised to become a regional growth telco.

Valuation

- At the current price, Time DotCom is trading at an estimated P/E of 23.6x and 18.1x for FY11 and FY12 respectively. HLE maintain our target price of RM0.89 based on SOP, pending

the outcome of the recent proposed acquisitions and pending details on the collaboration with Astro..