digi
TRANSCRIPT
BIMB SECURITIES RESEARCH
MARKET INSIGHT
Friday, 20 January, 2012
PP16795/03/2012(029624)
| 1
Results Review – DIGI.com Buy A Happy Ending FY11 Price: RM3.88
Target Price: (+10.8%) RM4.30
Stock Data
Bloomberg Ticker DIGI MK
Equity
Altman Z-score 6.9
Market Cap 30,167.0 YTD price chg 0.0%
Issued shares 7,775.0 YTD KLCI chg -0.9%
52-week range (H) 3.99 Beta 0.8
52-week range (L) 2.48 Major Shareholders 3-mth avg daily volume 7,126,705 Telenor Asa 49.0%
Free Float 33.0% EPF 16.6%
Shariah Compliant Y Financial Derivatives n.a. Share Performance (%) 1mth 3mth 12mth Absolute 7.5 24.1 59.7 vs. KLCI 56.7 16.7 56.7
Financial Highlights
FY 31 Dec (RMm) 2009 2010 2011 2012E 2013E Turnover 4,909.6 5,406.5 5,964.0 6,524.5 7,074.7 EBITDA 2,124.6 2,411.4 2,764.9 3,066.9 3,269.0 Pretax profit 1,366.5 1,597.2 1,560.3 1,771.8 1,867.0 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 PER (x) 30.2 25.6 24.0 22.7 21.5 DPS (sen) 17.8 16.3 17.5 18.0 19.0 Div. Yield (%) 4.6% 4.2% 4.5% 4.6% 4.9% NTA/share (RM) 0.07 0.06 0.09 0.10 0.11 EBITDA margin 43.3% 44.6% 46.4% 47.0% 46.2% Pretax margin 27.8% 29.5% 26.2% 27.2% 26.4% Effective tax rate 26.8% 26.2% 19.6% 25.0% 25.0% ROE 65.8% 87.5% 88.9% 96.6% 110.8% ROA 21.1% 22.9% 25.8% 26.6% 27.1% Net Gearing (x) 0.3 0.2 net cash net cash net cash Growth ratios Turnover 2.0% 10.1% 10.3% 9.4% 8.4% EBITDA -2.1% 13.5% 14.7% 10.9% 6.6% Pretax profit -11.7% 16.9% -2.3% 13.6% 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
2.00
2.50
3.00
3.50
4.00
4.50
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
The Research Team
03-26918887 ext 111
Digi posted its 4QFY11 net earnings of RM394.2m, is inline with our forecast. Full year earnings of RM1,254.4m is 6.5% higher than previous year boosted by strong topline growth of 10.3%. EBITDA margin has improved marginally. Full year ARPU saw a slight decline however this will be offset by higher number of subscribers. We have upgraded our FY12 and FY13 net earnings forecast by 5.3% and 7.7% respectively. Target price is increased from RM3.50 to RM4.30. Upgrade to BUY.
Strong topline growth. Full year revenue grew by 10.3% boosted by increased subscribers by 13.2% to 9.9m; higher voice and data usage, and increased take-up of bundled offerings of smartphones and devices. Mobile subscribers saw a huge jump of 23.5% to 5.2m users.
Improved margin. Full year EBITDA margin of 46.4% is higher than previous year’s of 44.6% mainly due to better cost control. Nonetheless, EBIT margin is lower due to higher depreciation charges.
Lower ARPU. QoQ prepaid ARPU has declined slightly from RM43 to RM42 while postpaid ARPU saw a slight increase from RM85 to RM86. Meanwhile full year blended ARPU of RM50 is 3.8% lower than previous year.
Going forward. Digi has commenced physical Radio Access Network (RAN) swap in Q411, on target to complete network swap by end-2012. Also DiGi aims to have a fully enabled Long Term Evolution (LTE) network, over the next 12 months to further enhance its mobile internet speed.
Increasing our forecast. We are increasing our FY12 and FY13 net earnings forecast by 5.3% and 7.7% to RM1,328.9m and RM1,400.2m respectively by factored in higher subscribers growth, circa 9%.
Higher dividend. Digi announced its 4th interim dividend of 6.5sen (tax exempt) totalling to 17.5sen for FY11 with a payout ratio of more than 100%. We expect the dividend payout to grow in tandem with earnings growth. We forecast dividend payout of 18sen and 19sen for FY12 and FY13 respectively translating into yield of 4.6% and 4.9%.
Upgrade to BUY. Following the earnings revision, we are increasing our target price from RM3.50 to RM4.30, using DCF methodology (WACC assumption 8.6%). Coupled with dividend yield of 4.6% and share price upside of 10.8%, the stock could offers potential total return of 15.5%, hence we upgrade Digi to BUY.
20 January 2012 Results Review: Digi.com 4QFY11
www.bimbsec.com.my | 2
Quarterly figures FY 31 Dec (RMm) 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 QoQ Chg YoY Chg FY10 FY11 YTD Chg
Revenue 1,429.7 1,430.6 1,468.0 1,520.0 1,545.4 1.7% 8.1% 5,406.5 5,964.0 10.3%
EBITDA 663.3 657.2 671.9 708.0 727.8 2.8% 9.7% 2,411.4 2,764.9 14.7%
Pretax profit 450.3 447.2 325.3 398.5 389.3 -2.3% -13.6% 1,597.2 1,560.3 -2.3%
Taxation (118.3) (115.8) (89.0) (106.1) 4.9 -104.6% -104.1% (419.2) (305.9) -27.0%
Minority Interest 0.0 0.0 0.0 0.0 0.0 n.a. n.a. 0.0 0.0 n.a.
Net Profit 332.0 331.4 236.3 292.5 394.2 34.8% 18.7% 1,178.0 1,254.4 6.5%
EPS (sen) 4.3 4.3 3.0 3.8 5.1 34.8% 18.7% 15.2 16.1 6.5%
Net gearing (x) 0.2 0.1 0.1 net cash net cash n.a. n.a. 0.2 net cash n.a.
EBITDA margin (%) 46.4% 45.9% 45.8% 46.6% 47.1% 1.1% 1.5% 44.6% 46.4% 3.9%
PBT margin (%) 31.5% 31.3% 22.2% 26.2% 25.2% -3.9% -20.0% 29.5% 26.2% -11.4%
Net profit margin
(%)
23.2% 23.2% 16.1% 19.2% 25.5% 32.6% 9.8% 21.8% 21.0% -3.5%
Effective tax rate (%) 26.3% 25.9% 27.4% 26.6% -1.3% -104.7% -104.8% 26.2% 19.6% -25.3%
Source: BIMB Securities
Income Statement FY 31 Dec (RMm) 2009 2010 2011 2012E 2013E
Revenue 4,909.6 5,406.5 5,964.0 6,524.5 7,074.7
EBITDA 2,124.6 2,411.4 2,764.9 3,066.9 3,269.0
Pretax profit 1,366.5 1,597.2 1,560.3 1,771.8 1,867.0
Tax (366.0) (419.2) (305.9) (443.0) (466.7)
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 18.0 19.0
NTA/ share (RM) 0.07 0.06 0.09 0.10 0.11
Net gearing (x) 0.3 0.2 net cash net cash net cash
PER (x) 30.2 25.6 24.0 22.7 21.5
Div. yield (%) 4.6% 4.2% 4.5% 4.6% 4.9%
P/ NTA (x) 52.8 60.3 44.4 39.5 35.9
ROE (%) 65.8% 87.5% 88.9% 96.6% 110.8%
ROA (%) 21.1% 22.9% 25.8% 26.6% 27.1%
Source: BIMB Securities
Balance Sheet FY 31 Dec (RMm) 2009 2010 2011 2012E 2013E
Non Current Assets 3,858.3 3,805.9 3,240.5 2,736.0 2,202.2
Current Assets 874.1 1,330.8 1,622.8 2,254.4 2,963.2
Total Assets 4,732.4 5,136.6 4,863.3 4,990.4 5,165.4
Current Liabilities 2,025.8 2,271.6 2,593.3 2,790.9 3,043.0
Non 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 1,340.8 1,263.8
Minority Interests 0.0 0.0 0.0 0.0 0.0
Equity & Liabilities 4,732.4 5,136.6 4,863.3 4,990.4 5,165.4
Source: BIMB Securities
20 January 2012 Results Review: Digi.com 4QFY11
www.bimbsec.com.my | 3
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 analyst’s coverage universe, is expected to outperform the relevant primary market
index over the next 12 months
NEUTRAL The Industry as defined by the analyst’s 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 analyst’s 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