KUCHING: With Digi.Com Bhd’s (Digi) first nine months 2018 (9M18) earnings generally meeting or surpassing expectations, analysts highlight that the group’s shift in service revenue mix from prepaid to postpaid was a good move for the group.
From the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) viewpoint, the strategic shift in service revenue mix from prepaid to postpaid has bode well for Digi.
“As at the third quarter of 2018 (3Q18), the ratio of postpaid to prepaid customer has risen steadily to 0.23 from 0.2 a year ago.
“This was supported by attractive and competitive postpaid internet proposition that Digi has introduced,” MIDF Research said.
MIDF Research viewed that the higher proportion of postpaid revenue would also indicate better earnings stability.
“Meanwhile, earnings before interest, tax, depreciation and amortisation (EBITDA) margin has been relatively stable at around 47 per cent supported by higher mix of internet revenue and efficient cost management.
“The improvement in earnings translates into better dividend payment as Digi paid almost all of its earnings as dividend.”
At this juncture, the research arm viewed that Digi has the most attractive dividend yield of more than 4.5 per cent as compared to the group’s peers.
MIDF Research has input faster pace of growth stemming from the postpaid segment and trimming the traffic charges and sales and marketing expenses to reflect Digi’s effort to maintain the group’s healthy EBITDA margin.
As a result, the research arm’s financial year 2018 forecast (FY18F) and FY19F earnings estimates were revised upwards by 9.6 per cent and 6.3 per cent respectively.
Digi’s 9M18 financial performance, which recorded normalised earnings of RM1.162 billion, had surpassed MIDF Research’s expectation, making up more than 80 per cent of FY18 full year earnings estimates.