Friday 29 Mar 2024
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KUALA LUMPUR (April 24): Digi.Com Bhd, which reported a slight dip in its first quarter net profit yesterday, was among Bursa’s top losers this morning. The stock ended 3.33% or 15 sen lower at RM4.35 at the noon market close.

The stock had earlier slipped to a low of RM4.32.

Net profit fell 2.78% to RM332 million in the first quarter ended March 31, 2020 (1QFY20) from RM341.5 million a year earlier, as other expenses jumped, while it recorded a net loss from its foreign currency and fair value movement currency forward contracts.

Total revenue for 1QFY20, however, climbed 3.43% y-o-y to RM1.56 billion from RM1.51 billion, underpinned by focused customer offerings to drive quality subscriber base and network connectivity.

MIDF Research said the results were within expectations and that the mobile telecommunication network provider’s declared first interim dividend per share of 4.2 sen is likely to keep investors interested in the company.

“The group has shown resilient service revenue. This was mainly supported by the higher postpaid revenue as the postpaid subscriber base continues to increase,” it said in a note today.

However, it said the Covid-19 pandemic has led to a slower pace of new subscriber acquisition and with the further extension of the Movement Control Order, addition of new subscribers is likely to slow.

MIDF maintained its “neutral” call on Digi.com, with an unchanged target price of RM4.30.

“To partially account for the subdued revenue growth, we view that more focus will be on operation efficiency, which would help sustain healthy profit margin. This includes careful network management to minimise a sudden huge increase in capex that could potentially affect its cash flow. Meanwhile, we expect that dividend yield of about 4% would also keep investors’ interest in the company,” it said.

Digi.Com’s results were also in line with AllianceDBS Research’s expectations, which maintained its “buy” call and target price of RM4.80.

In a research note today, it said due to the Movement Control Order, Digi saw a significant increase of 29% in data usage during peak hours as most people worked from their homes.

To maintain the quality and consistency of its network, AllianceDBS said Digi has undertaken a few network management initiatives, including (1) prioritising traffic optimisation to cater to increasing demand in residential areas; (2) prioritising the quality of service to mission critical and essential services; and (3) collaboration with application providers to reduce bandwidth demand.

“Being a domestic-focused operator, we believe Digi’s earnings will stay resilient amid the ongoing macroeconomic uncertainties and Covid-19 outbreak. Its 4.1% net dividend yield is currently the highest among Malaysian telcos, and is supported by a strong balance sheet,” AllianceDBS Research said.

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