KUALA LUMPUR (April 23): PublicInvest Research has maintained its “Neutral” rating on DiGi.Com Bhd at RM4.53 with a lower target price (TP) of RM4.72 (from RM4.80) and said DiGi reported an 11.6% decline in 1QFY19 net profit to RM341.5 million, mainly due to the adoption of MFRS 16 and lower prepaid revenue.

In a note today, the research house said MFRS 16 requires the lessee accounting to apply a “right-of-use” approach in recognizing assets and liabilities for the rights and obligations created by the lease contracts that were previously off-balance sheet items.

It said this has resulted in a drop in operating expenses but an increase in depreciation, amortisation and finance costs.

“Meanwhile, prepaid revenue was down 13.7% year-on-year due to an 8.6% decline in subscriber base.

“We cut our FY19-21F earnings by 5% to factor in the impact of MFRS 16 adoption, which results in a net increase in finance cost.

“As such, our TP is revised down from RM4.80 to RM4.72. We maintain our Neutral rating on Digi. A first interim dividend of 4.3 sen per share was declared (1QFY18: 4.9sen),” it said.