KUCHING: DiGi.com Bhd (DiGi) delivered higher than expected results for the ninth month of the financial year 2011 with its RM860.2 million net profit, accounting for some 75 per cent of consensus’ full year estimates.
“The results are believed to be contributed by continued strong voice revenue growth of two per cent quarter-on-quarter, robust non-voice revenue of 40 per cent year-on-year growth which raised data revenue contribution to 30 per cent of mobile revenue,” OSK Research Sdn Bhd (OSK Research) analyst Jeffrey Tan told The Borneo Post.
He added that DiGi’s aggressive promotions of its mobile internet plans also contributed to the unexpected better results. Such actions were taken in line with the company’s intention to capture a bigger slice of the mobile market by narrowing its coverage gap of 50 per cent against its competitors’ 80 per cent.
A progressively stronger smart phone take-up also contributed to DiGi’s bright outlook as smart phone penetration in Malaysia was estimated to be at a cumulative 20 per cent, while some 40 per cent of handsets sold this year was estimated to be smart phones, the analyst informed as he pointed out that the nation was still significantly behind Singapore’s smart phone penetration of more than 50 per cent.
Tan shed light on the company’s decision to back-load its capital expenditure (capex) of RM100 million from this year to 2012 due the delay of its physical network swap under its network modernisation plans. Thus, DiGi’s financial year capex had been lowered to RM550 million, while financial year 2012 capex had been raised from RM700 million to RM800 million.
“DiGi’s earnings before interest and tax, depreciation and amortisation (EBITDA) also saw a widened margin of 80 basis points quarter-on-quarter to a record 46.6 per cent, bringing year-to-date margin to 46.1 per cent,” commented Tan, adding that, “An expected 100 per cent payout from net profit translates into an interim dividend of 37 sen per share.”
OSK Research had since tweaked its financial year 2011 to 2012 forecasts by one to four per cent, leading it to peg a higher fair value of RM31.10 per share for DiGi, marking it as the research house’s preferred Malaysian telecommunications pick, alongside Telekom Malaysia Bhd.
RHB Research Institute Sdn Bhd (RHB Research) pegged a higher fair value of RM35 per share for the company, liking it for its “unwavering focus on data while simultaneously enhancing margins via continuous improvements in operation efficiencies and sharing collaboration.”
The research house elaborated in its research report, “DiGi’s prepaid average revenue per user remained stable at RM43, supported by higher data usage, riding on the back of mobile broadband pick-up of 35,000 new subscribers. This was thanks to smart bundling and affordable broadband pricing for the mass market.”
“Going forward, DiGi expects mid-to-high single digit revenue growth and improved EBITDA due to continued operational efficiencies and cost savings from its passive sharing collaboration with Celcom,” RHB Research opined.
“It may be taking a conservative view as it goes about modernising network and improving 3G coverage.”
The company expected the initial total savings of RM2.2 billion from the collaboration with Celcom to increase, pending further specifics. It also scheduled its network to be long-term evolution-ready by the end of 2012, foreseeing further data-contributed growth.
“With regards to spectrum allocation for 2,600 megahertz (Mhz), DiGi was expecting to know the outcome in the near future from Malaysia Communications and Multimedia Commission. It had also been awaiting further updates on the spectrum refarming of the 900Mhz and 1800Mhz spectrum,” added the research report, foreseeing a six to 12 months period before a decision.