Time DotCom (HLIB)

Price Target: RM 0.95

Share Price: RM0.79

Time Engineering’s Offer-For-Sale of TDC

News:

 Time Engineering (TENG) announced yesterday the final details on its offer-for-sale (OFS) of its TDC shares. TENG’s entire holding of 626.18m TDC shares (representing 24.74% of TDC’s shares) would be offered at an OFS price of RM0.53 per TDC share on the basis of 8 offer shares for every 10 TENG shares held as at 5.00pm on 5th July 2011.

 The price is based on a discount of 33.75% to the 5-day weighted average market price up to 17th June 2011.

Pros / Cons:

 As we had flagged in our earlier report (dated 24th January 2011, titled “Short-Term Overhang due to Offer For Sale) the OFS is likely to pose a short-term overhang to TDC’s share price due to the large volume of TDC shares coming into the market at a relatively steep discount.

 Nonetheless, we remain positive on TDC’s fundamentals as the company would be a key beneficiary from the mobile, fixed and media convergence in the data era and is poised to become a regional growth telco.

Risks:

 Irrational wholesale pricing and competition, new fiber roll-outs, government regulations and a contraction in demand for wholesale bandwidth.

Rating:

BUY (TP: 0.95)

 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 entering a series of synergistic acquisitions, the company is poised to become a regional growth telco.

Valuation:

 We believe the overhang on TDC will likely be brief and remain positive on the stock due to its outlook and long-term growth fundamentals. Maintain our Buy call with an unchanged SOP target price of RM0.95.