‘HOLD’ CALL ON DIGI MAINTAINED
HLIB Research sees long recovery road ahead due to data monetisation erosion
THERE will be a long recovery journey ahead for Digi.Com Bhd as the free one gigabyte daily quota will erode its data monetisation opportunity, said Hong Leong Investment Bank Bhd (HLIB Research).
It said while waiting for more clarity on the Celcom Axiata BhdDigi merger and fifth generation mobile technology special-purpose vehicle, a dividend yield of 3.4 per cent should sustain Digi’s share price in the near term.
Digi’s second quarter net profit of RM281 million brought its first half earnings to RM546 million, which matched HLIB Research’s full-year forecast of 49 per cent but missed consensus’ estimate of 47 per cent.
The one-off adjustment includes a non-recurring operating expenditure (opex) after-tax adjustment of RM1 million.
Digi has declared a second interim single-tier dividend of 3.6 sen per share, compared with 3.7 sen in the same period last year, representing a 100 per cent payout ratio.
Digi’s revenue rose 11 per cent as both service and device and other revenues trended upwards.
Within the service revenue, the prepaid segment rose three per cent while digital was up 42 per cent, but this was partly negated by the postpaid segment’s contraction of two per cent.
Earnings fell six per cent to RM281 million due to higher opex and corporate tax rates.
Postpaid revenue stood at RM623 million amid diminished roaming contribution.
It added 95,000 new subscribers in the second quarter along with quarter-on-quarter average revenue per user (ARPU) erosion of RM1 to RM64, said HLIB Research.
Prepaid sales strengthened to RM643 million but the company lost 128,000 subscribers due to the shortfall in the migrant segment, although that was partly offset by a larger Malaysian base.
The ARPU also rose by RM1 quarter-on-quarter to RM34.
HLIB Research has maintained a “hold” call on Digi with a target price of RM4 per share.