KUALA LUMPUR: Digi.Com Bhd's current share price level could offer an attractive buying opportunity for the stock for its industry-leading dividend yields of 4%, says Kenanga investment Bank Research.
The research house also believes Digi is the least-affected of the telcos during these difficult times, mainly owing to its already low-vased average revenue per user.
"Additionally, the stock also leads in net margins (c.24% vs peers’ average of c.9%) which should provide greater buffer against any subsequent (and more severe) downturn," it said.
Kenanga maintained its "outperform" recommendation on the stock with a target price of RM4.65.
On the back of Digi's 1H earnings announcement, the research house said it expects teh telco to undergo some recovery in the remaining months of the year.
In 1HFY20, Digi's core net profit of RM632mil was 12% lower year-on-year but made up 44% and 47% of Kenanga's and consensus full-year estimates.
Its interim dividend of 3.7 sen, which brought year-to-date payout to 7.9 sen was also in line with Kenanga's expected total payout of 18.4 sen.
According to Kenanga, while Digi experienced some loss of income in the March to June 2020 movement control order period, its loss of subscribers was mostly Prepaid due to sim card consolidation and involuntary churning, which led to improved customer quality.
"The group has now reignited its customer acquisition initiatives with new “bite-size” prepaid plans with partially unlimited data
offerings and partnerships to provide home fibre broadband connection.
"Although this is likely to spark resurgence in the group’s marketing expense, we opine the sales growth traction seen could translate well to earnings," it said.
The research house also believes Digi is the least-affected of the telcos during these difficult times, mainly owing to its already low-vased average revenue per user.
"Additionally, the stock also leads in net margins (c.24% vs peers’ average of c.9%) which should provide greater buffer against any subsequent (and more severe) downturn," it said.
Kenanga maintained its "outperform" recommendation on the stock with a target price of RM4.65.
On the back of Digi's 1H earnings announcement, the research house said it expects teh telco to undergo some recovery in the remaining months of the year.
In 1HFY20, Digi's core net profit of RM632mil was 12% lower year-on-year but made up 44% and 47% of Kenanga's and consensus full-year estimates.
Its interim dividend of 3.7 sen, which brought year-to-date payout to 7.9 sen was also in line with Kenanga's expected total payout of 18.4 sen.
According to Kenanga, while Digi experienced some loss of income in the March to June 2020 movement control order period, its loss of subscribers was mostly Prepaid due to sim card consolidation and involuntary churning, which led to improved customer quality.
"The group has now reignited its customer acquisition initiatives with new “bite-size” prepaid plans with partially unlimited data
offerings and partnerships to provide home fibre broadband connection.
"Although this is likely to spark resurgence in the group’s marketing expense, we opine the sales growth traction seen could translate well to earnings," it said.
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