Digi has ‘most attractive dividend yield compared to peers’

KOTA KINABALU: Digi.Com Bhd (Digi) has been viewed by analysts as having the most attractive dividend yield of more than 4.5 per cent, compared to the group’s peers.

Following Digi’s second quarter of financial year 2018 (2QFY18) financial results report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) highlighted that the strategic shift in service revenue mix from prepaid to postpaid has bode well for the group.

“As at 2Q18, the ratio of postpaid to prepaid customer has risen to 0.72 from 0.58 a year ago,” the research arm said.

“This was supported by attractive and competitive postpaid internet proposition that Digi has introduced.”

MIDF Research noted that the improvement in earnings also led to better dividend payment.

In a press release, Digi announced that for the second quarter of 2018 (2Q18) and post MFRS 15 adoption, a healthy second interim dividend of 4.9 sen per share or RM381 million. This is payable to shareholders on September 28, 2018.

“At this juncture, we view that Digi has the most attractive dividend yield of more than 4.5 per cent as compared to its peers.

“In addition, given the share price weakness, the stock is currently trading at an attractive price earnings ratio (PER) of 23fold which is below the two-year historical average of 24-fold.

“This would represent an opportunity for investor to increase exposure in the stock.”

As per Digi’s filing on Bursa Malaysia, the group’s profit after tax for 2QFY18 and first half of FY18 (1HFY18) amounted to RM384.34 million and RM770.45 million, respectively.

Digi’s 1HFY18 financial performance, with normalised earnings at RM772.4 million, came in within MIDF Research’s and consensus expectations, accounting for 55 per cent and 51.5 per cent of FY18 full year earnings estimates respectively. Meanwhile, AmInvestment Bank Bhd’s (AmInvestment Bank) FY18F-20F earnings for Digi were maintained as the group’s 1HFY18 pre-MFRS 15 net profit of RM711 million came in within expectations, accounting for half of the research firm’s forecast (similar to 1HFY17 against FY17 earnings) and 48 per cent of consensus.

As Digi’s 2QFY18 capital expenditure (capex) slid 19 per cent quarter on quarter (q-o-q) and 36 per cent year on year (y-o-y) to RM147 million (10 per cent of service revenue), AmInvestment Bank expected spending to accelerate which could raise depreciation charges in subsequent quarters.

“However, we may upgrade our earnings forecasts by five per cent to 10 per cent in the subsequent quarter if management’s drive to secure cost efficiencies from its network operating model transition gains traction,” the research firm said.