KUALA LUMPUR (Dec 18): Kenanga Research has initiated coverage on Time Dotcom Bhd (KL:TIMECOM) with an “outperform” call and a target price of RM5.91, citing the company’s potential to capitalise on the booming demand for internet traffic and data transmission.

According to Kenanga, there is “no end” to the internet traffic growth, driven by the adoption of 5G and the increasing prevalence of online activities, which positions the company to benefit from increased demand for global and terrestrial bandwidth services.

The research house noted that Time Dotcom’s extensive network of fiber optics and submarine cables is set to support this growth, especially with the rise of generative artificial intelligence (AI) and the expansion of data centres (DCs) in Malaysia. 

The company’s 30%-owned associate, AIMS, is expanding its DC capacity in Southeast Asia, and according to analysts, this presents a strong growth opportunity for Time Dotcom, as Asean’s DC co-location market is projected to grow at a compound annual growth rate (CAGR) of 15%-28% from 2023 to 2029.

Furthermore, Kenanga noted that the demand for cloud services in Malaysia is also expected to see robust growth, driven by new data protection regulations.

As one of the largest cloud service providers in Malaysia, Time Dotcom is poised to capture a significant share of the growing public cloud market, which is projected to reach US$5 billion by 2029 with a CAGR of 22%, as Kenanga forecasts a revenue growth of 2%-9% for Time Dotcom’s cloud segment in FY2024-FY2025, in tandem with this.

This growth is expected to stem from increasing demand for cloud services, driven by local enterprises undergoing digital transformation to comply with data protection and sovereignty regulations, Kenanga added. 

Overall, Kenanga’s earnings forecasts for Time Dotcom project a 19% increase in FY2024 and a 5% rise in FY2025, with revenue growth primarily driven by higher earnings from the data segment, and increased contributions from AIMS.

Despite concerns about the company’s ability to bridge the earnings gap following its disposal of a 70% stake in AIMS in May 2023, analysts are optimistic about Time Dotcom’s strategic positioning in the expanding digital infrastructure market.