HLG Research has initiated coverage on Time DotCom with a buy recommendation at 64 sen and target price 89 sen based on sum-of-parts.
The research house said the company has a good business model with regular recurring revenues and a high degree of operating leverage stemming from its underutilised fiber network.
HLG Research said it expects sustainable strong growth of 20% from Time DotCom's Data segment, stemming from the organic growth of Wholesale and Corporate & Government segments along with new growth areas from the fiberisation of mobile infrastructure and mobile backhaul.
"The company is undervalued relative to its business model, growth potential and assets.
"At current prices minus the discounted cash flow of core profits and DiGi shares, investors would be paying the equivalent of RM172 million for other assets worth RM800 million," it said.
It said Time DotCom is currently trading at a P/E of 22.3 times for FY10.
A multi-year growth period for the company should bring FY13 P/E valuations to within industry average levels of 13 times, it said.
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