Tuesday, October 25, 2011

RHB Research maintains Outperform on DiGi

KUALA LUMPUR: RHB Research Institute said DiGi.com's'' 9MFY11 net profit of RM860.2 million (+1.7% on-year) came in above its but in line with consensus expectations, accounting for 84% and 75% of full-year estimates respectively.

The research house said on Tuesday, Oct 25 that quarter-on-quarter revenue'' growth aided by festivities was strong at 3.5% due to stronger data (+10.4%)'' and prepaid voice (+3.3%).

RHB Research said the 3Q earnings before interest, tax, depreciation and amortisation (EBITDA) margin improved to 46.6% (2Q: 45.8%) due to further operational efficiencies.

'Stripping out accelerated depreciation, core net profit rose 10.4% on-quarter,' it said.

It said the 3Q total net adds moderated to 327,000 (2Q: up 447,000). Due to higher data usage, prepaid ARPU remained stable at RM43, while postpaid ARPU improved RM1 on-quarter to RM85.

DiGi declared its 3rd interim single-tier DPS of 37 sen, translating to 3Q EPS payout ratio'' of 98%.

'For 2012, management guided mid-to-high single digit revenue growth while EBITDA margin'' could improve from operational efficiencies and cost savings from Celcom collaboration. Due to the better-than-expected 3Q results, we have revised our FY11-13 earnings forecasts higher by 12%-19%,' it said.

RHB Research said it likes DiGi for its unwavering focus on data while simultaneously enhancing margins via continuous improvements in operational efficiencies and sharing collaboration.

'Following our upwards earnings revision, we maintain our Outperform call with a revised DCF-derived fair value of RM35.00 (previously RM31.50, WACC is unchanged at 7.7%),' it said.

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