For 1HFY21, Digi's core net profit of RM562mil and dividend per share of seven sen came within Kenanga's and consensus estimates at 48% of full-year forecasts.
Moving forward, Kenanga expects Digi to continue gaining postpaid subscribers at the expense of postpaid average revenue per user (Arpu).
"The Jaringan Prihatin program, coupled with DIGI’s entry-level postpaid plans, should continue to lift its postpaid subs base.
"On the prepaid front, Digi will continue efforts to attract more Malaysian subscribers as border closures continue to reduce its migrant worker subs base. With the local subs’ greater spend (relative to foreign subs), we expect to see gradual uptick in prepaid ARPU," said Kenanga.
The research house maintained "market perform" on Digi with a discounted target price of RM4.25, based on a 10.5x forward EV/EBITDA on Celcom Digi Berhad’s FY22E EBITDA of RM6bil.
"We believe the near-term merger synergies have already been priced in. Between now and when synergies meaningfully contribute in FY23, Digi could continue to face headwinds in its declining migrant subs base and ARPU-dilutive postpaid offerings," it said.