Affin Hwang maintains Hold on Digi, TP at RM5

  • Business
  • Monday, 15 Jul 2019

KUALA LUMPUR: Affin Hwang Capital research maintained its earnings foreacsts on Digi.Com with an unchanged hold rating and target price of RM5 following its 2Q19 earnings coming within expectations.

"At 27x 2019E PER, Digi’s now trades at 1SD above its 8-years average, looks fair, taking into consideration the promising business synergies from the potential merger with Celcom," the research house said in a note.

Last Friday, Digi announced 2Q19 net profit of RM392.5mil, which was up 13% quarter-on-quarter (q-o-q) on 2.7% higher q-o-q revenue, lower opex and lower effective tax rate.

The telco's service revenue grew 0.7% q-o-q to RM1.45il on higher contribution from the postpaid segment with a 2.5% increase in postpaid subscribers. Pre-paid subscribers grew to 8.44 million from 8.4 million in 1Q19.

For the six months ended June 30, Digi's results came in within 49-50% Affin Hwang's and consensus forecasts. 

"Cumulatively, Digi’s 6M19 net profit fell by 4.7% yoy due to the adoption of MFRS16 (leases) and lower service revenue, partly cushioned by lower opex. 

"The adoption of MFRS16 has lowered Digi’s 6M19 net profit by 5.9% (Fig 2). Elsewhere, Digi’s 6M19 revenue declined by 6% yoy due to lower interconnect revenue and lower total number of subscribers (-3.4% yoy)," it said.

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