bimbsec-digi 20120724 2qfy12 results review

7/31/2019 BIMBSec-Digi 20120724 2QFY12 Results Review

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BIMB SECURITIES RESEARCH

MARKET INSIGHTTuesday, 24 July, 2012

Results Review

PP16795/03/2013(031743)

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Digi.com Neutral

Inline Another Solid QuarterPrice: RM4.42

Target Price: (1.8% Upside) RM4.50

Stock Data

Bloomberg Ticker DIGI MK Altman Z-score 7.5Market Cap 34,365.5 YTD price chg 13.9%

Issued shares 7,775.0 YTD KLCI chg 6.9%

52-week range (H) 4.54 Beta 0.9

52-week range (L) 2.86 Major Shareholders

3-mth avg daily volume 7,673,30

Telenor Asa 49.0%

Free Float 33.5% EPF 15.8%

Shariah Compliant Y

Financial Derivatives n.a.

Share Performance (%) 1mth 3mth 12mth

Absolute 5.5 14.1 55.1

vs. KLCI 40.9 8.8 40.9

Financial Highlights

FY 31 Dec (RMm) 2009 2010 2011 2012E 2013ETurnover 4,909.6 5,406.5 5,964.0 6,571.1 7,205.4

EBITDA 2,124.6 2,411.4 2,764.9 3,086.9 3,313.4

Pretax profit 1,366.5 1,597.2 1,560.3 1,725.4 1,818.6

Core Net Profit 1,000.5 1,178.0 1,254.4 1,328.9 1,400.2

EPS (sen) 12.9 15.2 16.1 17.1 18.0

PER (x) 34.3 29.2 27.4 25.9 24.5

DPS (sen) 17.8 16.3 17.5 20.0 26.4

Div. Yield (%) 4.0% 3.7% 4.0% 4.5% 6.0%

NTA/share (RM) 0.07 0.06 0.09 0.08 0.01

EBITDA margin 43.3% 44.6% 46.4% 47.0% 46.0%

Pretax margin 27.8% 29.5% 26.2% 26.3% 25.2%

Effective tax rate 26.8% 26.2% 19.6% 23.0% 23.0%

ROE 65.8% 87.5% 88.9% 102.4% 262.7%

ROA 21.1% 22.9% 25.8% 27.4% 31.1%

Net Gearing (x) 0.3 0.2 net cash net cash net cash

Growth ratios

Turnover 2.0% 10.1% 10.3% 10.2% 9.7%

EBITDA -2.1% 13.5% 14.7% 11.6% 7.3%

Pretax profit -11.7% 16.9% -2.3% 10.6% 5.4%

Core Net profit -12.3% 17.7% 6.5% 5.9% 5.4%

EPS -12.3% 17.7% 6.5% 5.9% 5.4%

Share Price Chart

Thong Pak [email protected]

03-26918887 ext 186

Digis 1HFY12 net earnings of RM644.8m is inline with our

forecast. 1H revenue and net earnings grew by 8.6% and 13.6%

respectively. Overall margins have shown improvements due

to effective cost cutting measures. DiGi has been given the go-

ahead to commence LTE trials on 1800 MHz spectrum band and

this is scheduled to commence in 3QFY12. A second interim

dividend of 5.9 sen is proposed and we expect a total dividend

of 20sen to be paid for FY12, translating into a yield of 4.5%.

We rolled over our valuation to FY13 and arrived at a new

target price of RM4.50. With not much potential upside, we

downgrade Digi to Neutral.

Increased customer base. DiGi added 293,000 new customers in

2QFY12 (1QFY12: 16k) totalling 10.23m. The higher net addition

of new customers this quarter was driven by attractive bundled

offerings as well as targeted acquisition efforts. Prepaid and

postpaid ARPU remain stable at RM41 and RM85 respectively,

similar to previous quarter. At current quarter, data revenue

accounted for 30.3% (1QFY12: 30.7%) of Digis service revenue

as 23.5% (1QFY12: 22.2%) of overall customers are smart-phone

users which augurs well for future data revenue growth.

Improved EEBITDA margin. QoQ and YoY EBITDA margin has

improved from 25.9% 22.2% respectively to 26.5%, mainly due

to effective cost cutting measures.

Regulatory updates. Digi is still waiting for the final decision

from Malaysian Communications and Multimedia Commission

(MCMC) on the final allocation for the 2600 MHz spectrum. In

the meantime, DiGi has been given the go-ahead to commence

LTE trials on 1800 MHz spectrum band and this is scheduled to

commence in Q312.

Higher CAPEX for current Quarter. Digis CAPEX totalled

RM177m in 2QFY12, 50% higher than 1QFY12 of RM118m. The

bulk of CAPEX was spent on coverage expansion; capacity

upgrades as well as works related to our network modernisation.

Maintaining our forecast. We are maintaining our FY12 and

FY13 net earnings at RM1,328.9m and RM1,400.2m respectively.

Balance sheet remains healthy with net cash position, however,

operating cash-flow have reduced to RM575m (RM619m in

1QFY12) resulted from higher CAPEX in the quarter.

Second interim dividend. Digi proposed its second interim

dividend of 5.9sen. We maintain our FY12 dividend forecast

20sen translating into yield of 4.5%.

Downgrade to Neutral. We rolled over valuation basis to FY13

and arrived at a new target price of RM4.50, using DCF

methodology (WACC assumption 8.6%). Coupled with dividend

yield of 5% and share price upside of 1.8%, the stock could offers

potential total return of less than 10%, hence, we downgrade

Digi to NEUTRAL.

4.20

4.40

4.60

4.80

5.00

5.20

5.40

Jul -11 S ep- 11 N ov- 11 Jan- 12 Ma r- 12 Ma y- 12
mailto:[email protected]:[email protected]:[email protected]


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24 July 2012 Results Review: Digi.com 2QFY12

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Quarterly figuresFY 31 Dec (RMm) 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 QoQ Chg YoY Chg 1HFY11 1HFY12 YTD Chg

Revenue 1,468.0 1,520.0 1,545.4 1,569.4 1,579.7 0.7% 7.6% 2,898.6 3,149.1 8.6%

EBITDA 671.9 708.0 727.8 736.9 (571.8) -177.6% -185.1% 1,329.1 165.1 -87.6%

Pretax profit 325.3 398.5 389.3 405.8 419.3 3.3% 28.9% 772.4 825.1 6.8%

Taxation (89.0) (106.1) 4.9 (85.2) (95.1) 11.7% 7.0% (204.7) (180.3) -11.9%

Minority Interest 0.0 0.0 0.0 0.0 0.0 n.a. n.a. 0.0 0.0 n.a.

Net Profit 236.3 292.5 394.2 320.6 324.2 1.1% 37.2% 567.7 644.8 13.6%

EPS (sen) 3.0 3.8 5.1 4.1 4.2 1.1% 37.2% 7.3 8.3 13.6%

Net gearing (x) 0.1 net cash net cash net cash net cash n.a. n.a. 0.1 net cash n.a.

EBITDA margin (%) 45.8% 46.6% 47.1% 47.0% -36.2% -177.1% -179.1% 45.9% 5.2% -88.6%

PBT margin (%) 22.2% 26.2% 25.2% 25.9% 26.5% 2.7% 19.8% 26.6% 26.2% -1.7%

Net profit margin 16.1% 19.2% 25.5% 20.4% 20.5% 0.4% 27.5% 19.6% 20.5% 4.5%

Effective tax rate (%) 27.4% 26.6% -1.3% 21.0% 22.7% 8.1% -17.0% 26.5% 21.9% -17.6%

Source: BIMB Securities

Income Statement

FY 31 Dec (RMm) 2009 2010 2011 2012E 2013ERevenue 4,909.6 5,406.5 5,964.0 6,571.1 7,205.4

EBITDA 2,124.6 2,411.4 2,764.9 3,086.9 3,313.4

Pretax profit 1,366.5 1,597.2 1,560.3 1,725.4 1,818.6

Tax (366.0) (419.2) (305.9) (396.5) (418.4)

MI 0.0 0.0 0.0 0.0 0.0

Core Net Profit 1,000.5 1,178.0 1,254.4 1,328.9 1,400.2

EPS (sen) 12.9 15.2 16.1 17.1 18.0

EPS growth (%) -12.3% 17.7% 6.5% 5.9% 5.4%

DPS (sen) 17.8 16.3 17.5 20.0 26.4

NTA/ share (RM) 0.07 0.06 0.09 0.08 0.01

Net gearing (x) 0.3 0.2 net cash net cash net cash

PER (x) 34.3 29.2 27.4 25.9 24.5

Div. yield (%) 4.0% 3.7% 4.0% 4.5% 6.0%P/ NTA (x) 60.2 68.6 50.6 56.5 310.7

ROE (%) 65.8% 87.5% 88.9% 102.4% 262.7%

ROA (%) 21.1% 22.9% 25.8% 27.4% 31.1%


Balance SheetFY 31 Dec (RMm) 2009 2010 2011 2012E 2013E

Non Current Assets 3,858.3 3,805.9 3,240.5 2,655.2 2,023.3

Current Assets 874.1 1,330.8 1,622.8 2,199.2 2,473.4

Total Assets 4,732.4 5,136.6 4,863.3 4,854.5 4,496.7

Current Liabilities 2,025.8 2,271.6 2,593.3 2,810.5 3,105.1Non Current Liabilities 1,185.2 1,518.4 858.7 858.7 858.7

Shareholders' Fund 1,521.5 1,346.6 1,411.4 1,185.3 533.0

Minority Interests 0.0 0.0 0.0 0.0 0.0

Equity & Liabilities 4,732.4 5,136.6 4,863.3 4,854.5 4,496.7



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24 July 2012 Results Review: Digi.com 2QFY12

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DEFINITION OF RATINGS

BIMB Securities uses the following rating system:

STOCK RECOMMENDATION

BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months.

TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain.NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months

TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels.

TRADING SELL Share price may fall by more than 15% in the next 3 months.

SELL Share price may fall by more than 10% over the next 12 months.

NOT RATED Stock is not within regular research coverage.

SECTOR RECOMMENDATION

OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market

index over the next 12 months

NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary

market index over the next 12 months

UNDERWEIGHT The Industry as defined by the analysts coverage universe , is expected to underperform the relevant primary market

index over the next 12 months

Applicability of ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment

ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the

coverage do not carry investment ratings as we do not actively follow developments in these companies.

Disclaimer

The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for

information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB

securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group

and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The

information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to

ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it

should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and

estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn

Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X)

A Participating Organisation of Bursa Malaysia Securities Berhad

Level 32, Menara Multi Purpose, Capital Square,

No. 8 Jalan Munshi Abdullah,

50100 Kuala Lumpur

Tel: 03-2691 8887, Fax: 03-2691 1262 Kenny Yee

http://www.bimbsec.com.my Head of Research
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