DiGi.Com Bhd
(April 27, RM6.19)
Maintain buy with target price of RM7: DiGi.Com’s total subscribers rose 2.3% quarter-on-quarter ([q-o-q] +7.4% year-on-year [y-o-y] to 11.69 million, mainly due to improvement in high-speed data network performance and coverage, coupled with easy access to a wide range of affordable smartphone bundles.

Blended average revenue per user was slightly lower at RM46 q-o-q against RM47. Earnings before interest, taxes, depreciation, and amortisation margin fell to 43.3% from 44.5% q-o-q due to foreign exchange loss.

DiGi.Com’s data revenue surged 17.7% y-o-y and 2.8% q-o-q on higher Internet usage resulting from stronger data network. Smartphone penetration has reached 53.2% from 49.3% q-o-q (38.4% y-o-y).

Data traffic volume has increased to 19,900 terabytes (TB) against the previous years’ 9,900TB. With long-term evolution (LTE) network coverage rapidly expanding to more than 33% of the population, there will be increased data growth opportunity especially when the LTE network is now made available to prepaid subscribers.

We reduce our financial year ending December (FY15) and FY16 net earnings forecasts to RM2.13 billion (-1.6%) and RM2.25 billion (-1.6%), respectively, by factoring in higher depreciation charges.

DiGi.Com declared its first interim dividend of 6.1 sen per share. The earnings revision does not impact our discounted cash flow valuation as depreciation charges are a non-cash item, hence our fair value is unchanged at RM7. Maintain “buy”.  — BIMB Securities Research, April 27

This article first appeared in The Edge Financial Daily, on April 28, 2015.