Digi may recommend packages based on financial standing
KUCHING: Digi.Com Bhd (Digi) may recommend different packages to prospective customers based on their financial standing, which has alleviated analysts’ concerns that the group might not fully capitalise on a possible appetite for downtrading.
Following a conference call with chief financial officer Inger Folkesen, analysts were left feeling reassured by Digi’s near-term prospects.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), Digi expressed the need for tighter credit quality checks amidst ongoing economic difficulties.
“That said, the approach adopted could be more fluid as to recommend different packages to prospective customers based on their financial standing,” Kenanga Research said.
“This alleviated our concerns that the group might not fully capitalise on a possible appetite for downtrading, particularly from its peers, given that affordability is a growing issue among consumers.”
The research arm gathered that based of the second quarter of financial year 2020 (2QFY20) numbers, Digi’s blended average revenue per user (ARPU) stood at RM40 per month while the group’s listed peers range from RM47 per month to RM57 per month.
That said, the approach adopted could be more fluid as to recommend different packages to prospective customers based on their financial standing. Kenanga Research
“Digi has consciously decided against offering fully ‘unlimited’ data offerings and instead focused on a selective unlimited access model on high usage apps (such as Youtube, Facebook, Instagram, Twitter) without speed limits.
“Giving selective access could yield the highest equity and experience for customers on apps which most users would be accessing anyway, which might otherwise result in less sticky customers.”
Kenanga Research also highlighted on Digi’s entry into the fibre broadband space has opened new opportunities for the group to expand revenue streams.
“Management had also previously expressed the idea of packaging and bundling high value propositions into single billings for customer convenience.
“We find this convergence to be a natural course of action for telcos to keep customers more attached to their brands.
“On another note, Digi’s collaboration with SenHeng to introduce the co-branded PlusOne Connect prepaid sim cards could attract new users with the prospects of retail rewards, particularly repeat customers.”
If proven successful, the research arm does not discount that further collaborations would develop in the market.
Post-update, Kenanga Research left its financial year 2020-2021 estimate (FY20EFY21E) earnings unchanged. Core net profit for FY20EFY21E has thus remained at RM1.3 billion and RM1.384 billion, respectively.
The research arm recalled that Folkesen believes that the group has learnt much from the March Movement Control Order (MCO) and has better clarity in navigating around shifting business climates from further movement controls.
“Therefore, she believes that the updated earnings guidance should remain intact, which to recap are service revenue declining by a low-to-medium single-digit percentage and earnings before interest, tax, depreciation and amortisation (EBITDA) declining by a medium-to-high single-digit percentage.”