KUALA LUMPUR: Time dotCom Bhd's more than RM2 billion sale of its data centre business will diminish the long-term shareholder value for some of Malaysia's largest public funds, industry observers caution.

Time shareholders will deliberate on the disposal at an extraordinary general meeting today.

The Employees Provident Fund, Khazanah Nasional Bhd and the Retirement Fund (Incorporated) or KWAP collectively hold a 37 per cent stake in Time.

Time had on last Nov 21 announced the divestment of its AIMS data centre business in Malaysia and Thailand to Digital Bridge Group Inc's unit DB Arrow Pte Ltd for slightly over RM2 billion.

Shareholders have been dangled a carrot as Time proposed a dividend of RM1 billion or half of the sale proceeds.

However, an industry observer noted that upon divestment of AIMS, Time would deconsolidate the high growth data centre segment.

Hence, it would lose the opportunity to realise future share price gains from the growth of the data centre segment and increase its share of contribution to a well diversified revenue and net profit portfolio mix.

"The data centre segment is a key beneficiary of data explosion globally. Data centre demand in the Asean region is expected to see sustained growth of about 15 per annum during this decade," the observer noted.

Industry observers pointed that AIMS Group's revenue,gross profit and net profit had grown by 18 per cent, 14 per cent and 15 per cent respectively from financial years 2020 (FY2020) to FY2021.

The data centre segment represented 13 per cent of revenue and 9.5 per cent of net profit for Time in FY2021.

Time reported earnings before interest, taxes, depreciation and amortisation (Ebitda) of RM689 million for FY2021. This implied a leverage capacity of RM2.76 billion at four times Ebitda.

As at Sept 30 last year, Time had net cash balance sheet reporting cash reserves of RM408 million and borrowings of RM127 million.

"Time can leverage its balance sheet to pay dividends to shareholders," the observer remarked.

The company can also undertake organic and inorganic expansion of its data centre business in the Asean region (including the option to undertake partnerships and JVs with global data centre players) without divesting AIMS and deconsolidating its high growth data centre assets.

Time share price will trade at lower PE (price earnings) and Ebitda multiples post-divestment of

AIMS, reflecting a low growth fibre only business as opposed to the present higher growth fibre plus data centre business.