KUALA LUMPUR: RHB Research has maintained its Buy call on DiGi with a target price of RM6.50, based on a FY15 price per earnings of 23 times, which is comparable to industry peers.
In a note on Thursday, RHB said it expects revenue growth to be sustained at 5% and earnings to grow 9% on-year, partly boosted by alow effective tax base in 3QFY13.
"A stable competitive environment andcontinued growth in mobile internet growth are key drivers, in our view," it said.
It expects DiGi's growth to be supported by a relatively stable competitive environment.
"Other than Maxis’ launch of Maxis One Business for business users, we believe 3QFY14 was rather quiet in terms of newproduct launches.
"Besides that, Celcom remained quiet as it works toresolve issues related to its IT transformation. We note that its average-revenue-per-user levels for both prepaid and postpaid have been holding up quite well forseveral consecutive quarters, which should bode well for earnings.
"Continued sales of mid-tier smartphones and further inroads in the postpaid market will likely drive DiGi’s mobile internet revenue growth.
"As at 2QFY14, its smartphone penetration stood at 41.9%, and weexpect this figure to continue rising steadily as mid-tier smartphones like Xiaomi continue to remain popular. Following some marketing efforts to highlight the reliability of its new network for data consumption, we believe DiGi could make further inroads in the postpaid segment," it said.
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