Stock Name: DIGI
Company Name: DIGI.COM BHD
DiGi.Com Bhd
(July 21, RM30)
Maintain hold at RM29.84 with revised target price of RM30.80 (from RM30.40): Earnings (before exceptional items) for 2Q11 fell 29% quarter-on-quarter to RM236 million after DiGi booked accelerated depreciation and one-off interest expense totalling RM162 million. Excluding this, core earnings grew 20% and pre-tax profit 9%. Mobile internet/broadband remained the revenue driver with 15% growth to RM151 million in 2Q11 and helped keep average revenue per user (ARPU) stable at RM50 (blended), thanks to an increase in smartphone users and DiGi's various campaigns.
Smartphone users now account for 17% (+2pps) of DiGi's total subscriber base (of 9.3 million). Prepaid voice revenue also grew 3% to RM768 million, supported by higher usage (+2% to 241 minutes) and higher net adds (404,000) with improved sales of DiGi Easy Prepaid. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin was stable q-o-q at 46%. Net profit for 1H11 was 56% of our initial full-year forecast.
Earnings for FY11F to FY13F are nudged up by 4% to 6% after imputing one-off interest expense in 2Q11, offset by lower depreciation assumptions and RM1 increase in ARPU (based on 1H11 performance). Our forecasts have not reflected the impact of the 6% service tax ' expected to be passed on to prepaid users starting Sept 1 (delayed from July 1) ' as we understand operators are still discussing this with the regulator and the decision is still not final yet.
If it goes through, we expect DiGi to see only a slight positive impact. It might adjust its prepaid tariffs to curb a drop in usage as prepaid subscribers are generally price-sensitive and this user segment is very important to DiGi given that it accounts for 84% of its subscriber base.
We maintain 'hold' with our target price raised to RM30.80 (weighted average cost of capital: 7.3%, terminal growth: 1%) after lifting FY11F to FY13F Ebitda by 1% on higher ARPU assumptions. The share price is supported by 6% forecast net dividend yield (RM1.63 dividend per share). ' HwangDBS Vickers Research, July 21
This article appeared in The Edge Financial Daily, July 22, 2011.
Company Name: DIGI.COM BHD
| Research House: HWANGDBS | Price Call: HOLD | Target Price: 30.80 |
DiGi.Com Bhd
(July 21, RM30)
Maintain hold at RM29.84 with revised target price of RM30.80 (from RM30.40): Earnings (before exceptional items) for 2Q11 fell 29% quarter-on-quarter to RM236 million after DiGi booked accelerated depreciation and one-off interest expense totalling RM162 million. Excluding this, core earnings grew 20% and pre-tax profit 9%. Mobile internet/broadband remained the revenue driver with 15% growth to RM151 million in 2Q11 and helped keep average revenue per user (ARPU) stable at RM50 (blended), thanks to an increase in smartphone users and DiGi's various campaigns.
Smartphone users now account for 17% (+2pps) of DiGi's total subscriber base (of 9.3 million). Prepaid voice revenue also grew 3% to RM768 million, supported by higher usage (+2% to 241 minutes) and higher net adds (404,000) with improved sales of DiGi Easy Prepaid. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin was stable q-o-q at 46%. Net profit for 1H11 was 56% of our initial full-year forecast.
Earnings for FY11F to FY13F are nudged up by 4% to 6% after imputing one-off interest expense in 2Q11, offset by lower depreciation assumptions and RM1 increase in ARPU (based on 1H11 performance). Our forecasts have not reflected the impact of the 6% service tax ' expected to be passed on to prepaid users starting Sept 1 (delayed from July 1) ' as we understand operators are still discussing this with the regulator and the decision is still not final yet.
If it goes through, we expect DiGi to see only a slight positive impact. It might adjust its prepaid tariffs to curb a drop in usage as prepaid subscribers are generally price-sensitive and this user segment is very important to DiGi given that it accounts for 84% of its subscriber base.
We maintain 'hold' with our target price raised to RM30.80 (weighted average cost of capital: 7.3%, terminal growth: 1%) after lifting FY11F to FY13F Ebitda by 1% on higher ARPU assumptions. The share price is supported by 6% forecast net dividend yield (RM1.63 dividend per share). ' HwangDBS Vickers Research, July 21
This article appeared in The Edge Financial Daily, July 22, 2011.
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