Friday, September 9, 2011

DiGi advances on capital distribution plan

KUALA LUMPUR: DIGI.COM BHD [] shares rose on Friday, Sept 9 after the company announced plans for a capital distribution to its shareholders.

At 9.15am, DiGi rose RM1.88 to RM33.00 with 136,800 shares traded.

The company on Sept 8 had announced a 1-for-10 share split which would increase in the number of shares from 777.5 million shares to 7.775 billion shares.

Its unit, DiGi Telecommunications Sdn Bhd (DiGiTel), is proposing to undertake a capital management initiative whereby DiGiTel will distribute RM509 million to

The proposed capital distribution entails the issuance of redeemable preference shares from DiGiTel to DiGi which upon redemption will result in a cash payment of RM509 million to

DiGi said it intended to distribute the excess proceeds from the capital distribution to all its shareholders by the first half of 2012.

RHB Research in a note Sept 9 said it was positive that DiGi intended to distribute excess cash of about RM509m (65 sen per share) to shareholders by 1HCY12.

The research house upgraded the stock to Outperform previously Trading Buy) with DCF-derived fair value of RM34.00 (WACC=7.7%), which offers total upside of 15.7% inclusive of 6.4% net dividend yield.

It said DiGi should be paying more dividends for FY11 (versus FY10: RM1.63/share) totalling RM1.6 billion (RM2.05/share) comprising: 1) FY11 DPS forecast of RM1.40 based on 100% payout of FY11 EPS; and 2) RM509m capital distribution (65/share).

Based on core FY11 earnings (after stripping out accelerated depreciation), this implies a payout ratio of 114%, it said.

'DiGi still has about RM692 million (89 sen per share) in share premium left. Going forward, management intends to tap into this account for future cash distribution,' said the research house.

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