KUALA LUMPUR: DiGi.Com Bhd (fundamental: 1.35; valuation: 2.1) is eyeing low to mid single-digit growth in service revenue for the financial year ending December 2015 (FY15), according to the group’s chief executive officer Lars Ake Norling. 

“We aim to outpace the service revenue of RM1.627 billion we posted for FY14, a 2.7% sequential growth year-on-year. This guidance does take into account the implementation of the goods and services tax (GST) in April,” Norling said during a teleconference briefing yesterday. 

“The macro outlook for the industry was fairly good in FY14, but it probably will weaken in FY15 due to constraints of the budget and falling oil prices. We still see very strong demand for mobile Internet, and it’s up to the industry to monetise the trend,” he said, when asked about the industry outlook. 

For the fourth quarter (4Q) ended December of FY14, DiGi.Com’s net profit grew 2.1% to RM560.1 million from RM548.52 million a year earlier. Profit growth came from the telecommunication company’s growth in Internet subscribers and lower taxes.

Revenue increased 4.05% to RM1.8 billion from RM1.73 billion. Profit before tax was lower at RM660.17 million against RM683.32 million.

“Internet subscribers grew 31% year-on-year [y-o-y] to 6.4 million (2013: 4.9 million) from a stronger customer base of 11.4 million. The additional 1.5 million active Internet subscribers accumulated during the year positively contributed to the increase in Internet revenue, which rose 39.6% for the year, and paves the way for future service revenue.

“The group’s effective tax rates for the current quarter and financial year ended Dec 31, 2014 of 15.2% and 23.2% respectively are lower than the statutory tax rate of 25.0%, mainly due to the utilisation of broadband network-related tax incentives relating to prior years by one of the subsidiaries of the group,” DiGi.Com said.

Its full-year net profit grew to RM2.03 billion from RM1.71 billion in the previous corresponding period, while revenue rose to RM7.02 billion from RM6.73 billion.

DiGi.Com proposed a dividend of 7.2 sen a share in 4QFY14, bringing its full-year dividend to 26 sen apiece.

DiGi.Com noted that FY14’s income growth was underpinned by data revenue, which accounted for 40% of group service revenue in 4QFY14.

Data revenue for FY14 grew 17.4% compared with FY13. The company attributed this to strong demand for Internet services, proliferation of a wider range of smartphones, and continuous expansion of coverage to more areas around Malaysia.

DiGi.Com’s chief financial officer Karl-Erik Broten said capital expenditure for FY15 would be maintained at FY14 levels, when the group spent RM904 million mostly on its 4G-LTE rollout and mobile Internet services. 

“There are good opportunities for growth in Malaysia and so we will invest the same amount. It is too early to comment on spending for FY16/FY17, but safe to say we will keep investing to stay on par with [the] competition and [to] cater to customer demand,” he said. 

DiGi.Com shares settled one sen or 0.15% lower at RM6.46 yesterday, with a market capitalisation of RM50.3 billion. 

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This article first appeared in The Edge Financial Daily, on February 10, 2015.