WIder network: The 800MHz, along with Digi's existing 1,800MHz and 2,600MHz spectrums will enable it to better serve customers who are increasingly consuming video content.
KUALA LUMPUR: AmInvestment Research is maintaining its Hold rating on Digi.Com with an unchanged discounted cashflow (DCF) based fair value of RM4.50 a share.
It said on Thursday this implies an FY18F EV/Ebitda (enterprise value/ earnings before interest, tax, depreciation and amortisation) of 13 times, which is the telco’s two-year average.
“Digi’s FY17F-FY19F earnings are maintained as the group’s 9MFY17 net profit of RM1.117bil was generally in line with expectations, coming in 75% of earlier FY17F earnings and 72% of consensus.
“We expect higher spectrum amortisation charges and year-end marketing costs to lead to a sequentially weaker 4QFY17 bottom line. As a comparison, Digi’s 9MFY16 accounted for 77% of FY16 net profit,” it said.
AmInvestment Research said Digi’s declaration of a 3QFY17 DPS of 4.9 sen, bringing 9MFY17 DPS to 14.4 sen (-11% on-year) with a payout of 100% is also is line with expectations.
It noted that on a quarter-on-quarter comparison, Digi’s 3QFY17 service revenue rose 1.6% after two consecutive quarterly declines, driven by a loss in prepaid subscribers.
The improvement in service revenue stemmed from a 295,000 increase in postpaid subscribers to 2.4 million since the beginning of the year, partly offset by a RM1 a month on-quarter decline in postpaid average revenue per user (ARPU) to RM77 a month.
Digi’s prepaid revenue stabilised at RM919mil, even though subscribers fell 3% to 9.5mil.
“The overall 1.1% on-quarter revenue increase together with a 66% plunge in interest cost (mostly from the absence of one-off refinancing costs in 2QFY17) led to Digi’s 3QFY17 net profit increasing by 7% on-quarter to RM385mil.
“Even though the decline in service revenue since 1QFY17 has been temporarily relieved in the current quarter, we note that the overall trajectory is still constrained as prepaid subscribers have declined by 798,000 or 8% on-year amidst rotational churn.
“The stock currently trades at a fair FY18F EV/Ebitda of 14 times near its two-year average. Given the highly competitive landscape, we expect Digi’s subscriber growth and ARPUs to remain under pressure as both Maxis and Celcom are also aggressively improving 4G coverage and service quality,” it said.
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