DIGI – Fundamental Analysis (13 Jul 2016)

Excel – Download the analysis file

Latest Financial Report – Q2 2016 Financial Report (11 Jul 2016) and Management Discussion And Analysis 2Q 2016

FY16 Q2 Results Highlight:

  • DIGI’s net profit for 2QFY16 fall 9.4% to RM420.61m, or 0.0541 eps (1QFY15: RM464.36m, 0.0597 eps), due to unrealised foreign exchange and derivatives losses of RM12.72 million. Its EBITDA fell 6.7% YoY to RM735m in 2QFY16, while its Ebitda margin slid 1.3 percentage points to 44%.
  • Revenue also came in 3.9% lower at RM1.66b, from RM1.72n in 2QFY15.
  • For 1HFY16, DIGI posted a 13.1% decline in net profit to RM819.65m or 0.1054 eps, from RM943.58m or 0.1214 eps in 1HFY15, due to aggressive high-speed data quota bundling and heavy discounts. Revenue stood at RM3.31b, down 5.7% from RM3.51b.
  • Its service revenue dropped 2% y-o-y to RM1.56b, even though its active Internet subscribers rose to eight million along an increase in smartphone penetration to 62%, while 4G LTE subscribers grew to 3.3m, from 1.3m a year ago.
  • Internet revenue made up a total of 36.1% of service revenue for 2QFY16, and continued to grow as smartphone adoption rose to 62% and active Internet subscribers up to 64.5% of the total subscriber base. ARPU was steady at RM42, backed by 12.3 million subscribers.
  • Despite being challenged by the industry’s aggressive Internet quotas and heavy discounts, DIGI’s postpaid ARPU strengthened to RM82 on a larger subscriber base, while prepaid ARPU dipped marginally to RM34, on the back of relatively stable prepaid subscribers.
  • Its 4G LTE and 4G LTE-A network footprint now stands at 76% and 34% of the population nationwide respectively

 

Going Forward:

  • Management has maintained an unchanged guidance for service revenue and EBITDA (similar to 2015 levels), but revised capex intensity guidance upwards to 13-14% of service revenue, from 11-12%. Nonetheless, management has guided that there is no change in plans for network roll-outs, where the capex intensity revision is due to costing estimations.
  • In my opinion, fair value of DIGI range from 5.1 to 5.3. Uncertainty risk of fair value is MEDIUM.
  • I will continue to hold this share, and accumulate it.

At the time of writing, I owned shares of DIGI.

2 thoughts on “DIGI – Fundamental Analysis (13 Jul 2016)

  1. Hi LC Chong , i just curious to know the WACC calculation . May i know how do we get the Beta and MRP for the risk premium .

    Like

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