Friday 29 Mar 2024
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KUALA LUMPUR (Oct 19): Hong Leong Investment Bank (HLIB) Research has lowered its target price (TP) for Digi.Com Bhd to RM4.10, from RM4.30, to reflect a downward earnings revision. 

In a note today, HLIB cut its earnings projections for Digi by 3% to 4% for the financial year ending Dec 31, 2020 (FY20) and FY21 following Digi's downward revision of its FY20 guidance. 

Hence, the research house anticipates the telco operator to generate an annual net profit of RM1.3 billion in FY20 and RM1.39 billion in FY21. This would be lower than earnings of RM1.43 billion reported for FY19. 

“We see a long recovery journey ahead despite gradual movement control order (MCO) easing as the free 1GB daily quota would erode its data monetisation opportunities until the end of FY20. 

“While waiting for more clarity of the Jendela and spectrum awards, a dividend yield of 3.8% should sustain its share price in the near term,” said HLIB, maintaining its “hold” recommendation for Digi. 

The research house said Digi’s core net profit of RM952 million for the cumulative nine months ended Sept 30, 2020 (9MFY20) missed the research house's forecast, but in line with consensus expectations.

Last Friday, Digi announced that its net profit for the third quarter ended Sept 30, 2020 (3QFY20) fell 9.9% to RM320.76 million, from RM356.05 million a year earlier, due to a margin slowdown compounded by the Covid-19 pandemic and higher depreciation cost.

Quarterly revenue, however, rose 1.1% to RM1.58 billion, from RM1.56 billion a year ago, fuelled by proliferated data monetisation opportunities and increased prepaid voice usage to offset softening post-paid revenue.

Following the lacklustre 3QFY20 net profit, Digi's cumulative 9MFY20 net profit dropped by 13.69% to RM940.79 million from RM1.09 billion a year ago. Its revenue for the period also slipped 0.59% to RM4.59 billion from RM4.62 billion. 

At 10.15am, Digi shares were traded unchanged at RM3.98. The stock saw 215,000 shares transacted.

Edited BySurin Murugiah
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