1H14 net profit was in line with our expectation at 46% of our full-year forecast.
TDC’s favourable thematics have, to a large extent, been priced in following the stock’s 36% YTD rally.
Maintain HOLD, TP unchanged at MYR5.00.
Revenue grew 18% QoQ in 2Q14, as all segments experienced sequential growth. Data was particularly strong (+23% QoQ) due to higher global bandwidth sales and recognition of lumpy IRU sales. Consequently, EBITDA margin expanded by 5ppt in the quarter to 37.4%. This brings 1H14 margin to 35.1%, in line with guidance.
TDC’s earnings are once again tracking expectations. TDC’s favourable thematics have, to a large extent, been priced in following the stock’s 36% YTD rally. We think a distribution of the remaining Digi tranche to shareholders is unlikely as TDC could turn net-debt (albeit marginally) in 2015 and 2016.
Our MYR5.00 TP is unchanged, based on a sum-of-parts, with 1) the core business valued at MYR3.65 per TDC share based on DCF and 2) its 137.5m Digi shares valued at MYR1.34 per TDC share (based on our MYR5.60 Digi TP)
Source: Maybank Research - 25 Aug 2014
TDC’s favourable thematics have, to a large extent, been priced in following the stock’s 36% YTD rally.
Maintain HOLD, TP unchanged at MYR5.00.
What’s New
TDC’s 2Q14 core net profit (excluding Digi dividends) of MYR35m (+15% YoY, +78% QoQ) brings 1H14 core net profit to MYR55m (-8% YoY), representing 46% of our full-year forecast (consensus forecasts include Digi dividends). 1H14 EBITDA of MYR101m (+1% YoY) was 48% of ours and 47% of consensus forecasts respectively.Revenue grew 18% QoQ in 2Q14, as all segments experienced sequential growth. Data was particularly strong (+23% QoQ) due to higher global bandwidth sales and recognition of lumpy IRU sales. Consequently, EBITDA margin expanded by 5ppt in the quarter to 37.4%. This brings 1H14 margin to 35.1%, in line with guidance.
What’s Our View
There is generally some degree of volatility in TDC’s quarterly results as data revenue can be lumpy. The strong showing in 2Q14 more than made up for a weak 1Q14 (due to an absence of lumpy IRU sales). With management alluding to more IRU sales in 2H14,TDC’s earnings are once again tracking expectations. TDC’s favourable thematics have, to a large extent, been priced in following the stock’s 36% YTD rally. We think a distribution of the remaining Digi tranche to shareholders is unlikely as TDC could turn net-debt (albeit marginally) in 2015 and 2016.
Our MYR5.00 TP is unchanged, based on a sum-of-parts, with 1) the core business valued at MYR3.65 per TDC share based on DCF and 2) its 137.5m Digi shares valued at MYR1.34 per TDC share (based on our MYR5.60 Digi TP)
Source: Maybank Research - 25 Aug 2014
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