PETALING JAYA: As Digi.com Bhd awaits approvals from the various agencies for its potential merger with Celcom Axiata Bhd, it will continue to focus on monetising data growth and growing quality subscribers.
Even though its first half 2021 earnings were slightly weaker, the acceleration of mobile Internet adoption during the period led to growing Internet subscribers to 8.83 million along with higher average data per user of 21.4GB monthly. This could partially help the group’s earnings to recover gradually.
TA Research said despite the ongoing challenges from Covid-19 headwinds, it remained positive on Digi’s ability to remain service revenue resilient in financial year 2021 (FY21), underpinned by efforts to drive quality subscriber acquisition.
Maybank IB Research said Digi’s management was maintaining its FY21 guidance, which is a low-single digit revenue decline and a mid-single digit earnings before interest, tax, depreciation and amortisation decline.
Kenanga Research added that it expects Digi to continue gaining post-paid subscribers at the expense of post-paid average revenue per user.
Digi turned in a net profit of RM280mil (-3% year-on-year, +6% quarter-on-quarter) for the second quarter of FY21, while first-half FY21 net profit came in at RM545mil – a 12% decline year-on-year.
Most research houses have not made any changes to their earnings forecast following Digi’s results announcement.
They have also maintained their target price for the stock.
UOB Kay Hian has a “hold’’ call on the stock with a target price of RM4.15 a share, while MIDF has a “neutral’’ view with a target price of RM3.84 a share. MIDF believes that Digi will pay a dividend yield of about 4% for this year.
Digi’s share price closed five sen lower to RM4.20 yesterday.
The possibility of the merger may positively affect Digi’s business prospects as the merged entity will be able to monetise the 19 million subscriber base and their strong data analytics capabilities to cross-sell and up-sell their products, said MIDF.
The merger between Celcom and Digi will only be completed in the second half of 2022 after the necessary approvals from the various agencies are obtained.
UOB Kay Hian said the merger synergies of about RM500mil per annum appeared to have been factored into the share price.