KUALA LUMPUR: AmInvestment Research is maintaining its rating of Digi with a Hold recommendation with an unchanged discounted cashflow-based fair value of RM4.95 a share.
It said on Monday this implies a FY17F enterprise value/earnings before interets, tax, depreciation and amortisation (EV/EBITDA) of 13 times, the stock’s two year average.
“As part of the current Raya celebration, Digi is offering special promotions that include weekly packages worth RM9 for 1.2GB of Internet quota and RM35 a month for 3GB for prepaid subscribers. These Raya promotions, which are valid until June 30, 2016, include unlimited music streaming as well as free calls and SMS to three Buddyz members,” it said.
AmInvestment said as a comparison, current weekly top-up offers include RM3 for 30MB, RM6 for 150MB and RM7 for 300MB. These include unlimited Whatsapp and WeChat usage.
Additionally, Digi Postpaid customers will be able to enjoy a price as low as RM65 per line for 21GB of Internet quota (RM3.10 per GB) to be shared among family members. For three persons, this would mean RM195/month or RM9.29 perGB.
The lowest postpaid plan is currently RM68 a month with 3GB data while family sharing packages include RM159 per month for 7.5GB to be shared with the principal, spouse and child, with an additional RM38 per line.
For now, rival U Mobile’s P70 package still offers the best rate at RM70 for 15GB data (RM4.67/GB) which has an option for a member line at RM50/month with an additional data of 3GB.
“Despite the group’s focus on the affordable market segment, Digi still aims to move its current cellular connectivity model to become a digital services provider in areas such as mobile banking, remittances, transactions and other applications,” it said.
Last month, Telenor Group, which owns the controlling 49% stake in Digi, bought a 100% equity stake in Prabhu Money Transfer Sdn Bhd, a Malaysia-based licensed money services business based in Malaysia that provides international remittance services.
“In our view, such a strategic shift by a celco, if successful, will likely require a long gestation period for significant alternative revenues to materialise. Hence, we maintain FY16F-FY18F average revenue per user (ARPU) assumptions for Digi as these new Raya offers will continue to maintain pressure on ARPUs,” it said.
AmInvestment said the group’s 1QFY16 blended ARPU fell by RM1 a month on-quarter to RM44 a month, driven largely by the postpaid segment, which fell from RM81 a month to RM80 a month.
“The stock currently trades at a fair FY17F EV/EBITDA of 12 times, near its three year average of 12.6 times,” it said.
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