Digi’s FY17 financial performance within expectations
KUALA LUMPUR: Digi.Com Bhd’s (Digi) financial year 2017 (FY17) financial performance is within analysts’ expectations.
As per Digi’s filing on Bursa Malaysia, the group’s profit for the year ended December 31, 2017 amounted to RM1.48 billion, down from RM1.63 billion from the corresponding period of the previous year.
Digi’s FY17 profit after tax and minority interest (PATAMI) came in within the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) expectations at 99 per cent and 98 per cent of house and consensus’ full-year estimates, respectively.
The group’s full year FY17 financial performance also came in within the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) and consensus expectations, accounting for 96.1 per cent and 98.1 per cent of FY17 full year earnings estimates respectively.
In view of weaker prepaid service revenue, MIDF Research cut its prepaid subscriber assumption to below nine million.
The research arm also fine tuned its FY18 postpaid average revenue per user (ARPU) assumption to better reflects the results thus far.
“We expect the postpaid ARPU to trend higher as the entry level postpaid plan has been revise to RM58 per month from RM50 per month previously.
“Nonetheless, we do not expect this to dampen the postpaid customer acquisition in view of stronger network capabilities,” it said.
These led to a more conservative FY18 earnings estimate of RM1.403 billion from the research arm.
According to MIDF Research, the overall subscriber base, ARPU and service revenue were undermined by the contraction in the prepaid segment in view of heightened competition among Digi’s peers.
The research arm observed that there is strategic shift in service revenue mix which will further enable digital opportunities.
“This has lead to continuous positive traction from the postpaid segment,” the research arm said.
“As expected the deployment of the 900Mhz has created positive impact on the postpaid segment by creating a more balancing playing field with its peers.”
However, MIDF Research expected to see further earnings dilution from the prepaid segment as we do not see the competition on the prepaid landscape to abate anytime soon.
“This could potentially disrupt the prepaid market. The exclusion from the shariah list further limits investor’s interest on the stock.”
Kenanga Research noted that Digi aims to ride 2018 with a sharper focus anchored on further streamlining of operations and digital transformation.
“Key focus areas will be on accelerating postpaid and enterprise revenue growth, increase Internet adoption and usage among its migrant subscribers and monetise data and grow Internet revenue,” it said.
The research arm has however noted that Digi is taking a guarded view on the group’s FY18 guidance with an aim to achieve flat-to-low single digit decline in service revenue growth, stable EBITDA margin and capital expenditure (capex) to service revenue ratio of 11-12 per cent.
All in, the research arm concurred with management’s view and adjusted its model accordingly.
Kenanga Research trimmed FY18 earnings before interest, tax, depreciation and amortisation (EBITDA) by four per cent, after revising its top-line and operating expenditure (opex) assumptions to align with management’s latest guidance.
Correspondingly, the research arm’s FY18 core net profit (CNP) was also lowered to RM1.45 billion (down 6.5 per cent).