DiGi.Com Bhd (Jan 25, RM3.95)
Maintain add at RM3.99 with revised target price of RM4.15: DiGi ended the year with 8.3 million (+13.4% year-on-year [y-o-y]) prepaid and 1.6 million (+11.7% y-o-y) postpaid subscribers, or total net adds of 1.16 million for FY11. Although blended average revenue per user (ARPU) was relatively lower at RM50 (-3.8% y-o-y — postpaid ARPU was up 1.2% y-o-y), DiGi’s FY11 top line grew 10.3% y-o-y to RM5.9 billion.
However, DiGi booked in accelerated depreciation charges of RM430 million resulting in a spike in depreciation charges to RM1.2 billion (+51% y-o-y) leading to a slightly weaker FY11 core net profit growth of 7.4% y-o-y to RM1.2 billion. Notwithstanding, FY11 results were 9% and 8% above our and street forecasts due to a lower than expected tax charge arising from a tax incentive. This will be recovered over a period of five years from FY09 to FY13. Dividend per share (DPS) for 4QFY11 amounted to 6.5 sen, totalling 17.5 sen for FY11 (ahead of our 16.3 sen forecast).
Sequentially, 4QFY11 net profit rose 34.8% to RM394.2 million largely due to a positive tax charge as a result of the tax incentive. At the pre-tax level, earnings were lower by 2.3% quarter-on-quarter (q-o-q) to RM389.3 million, largely due to higher depreciation charges (accelerated depreciation charges of RM150 million).
Ebitda margins showed healthy improvement, rising to 47.1% in 4Q from 46.6% in 3QFY11. This was driven by continued strong revenue growth due to improved coverage coupled with cost reductions. Revenue improvement was also largely underpinned by service revenue (+1.9% q-o-q). DiGi added 264,000 prepaid customers and 39,000 postpaid subs). Handset sales for 4QFY11 were lower by 2.5% q-o-q to RM78 million as customers held back for the iPhone 4S.
Management is guiding for mid to high single digit revenue growth for FY12, and expects growth to be ahead of industry (about 5%). The strong Ebitda margins in 4QFY11 are expected to improve further in FY12 or to sustain at least. Capex for FY12 is expected to be in the region of RM700 million to RM750 million, above FY11’s RM604 million.
We have raised our FY12/FY13 earnings per share forecast by 7% to 8% to account for management’s more upbeat Ebitda margin guidance, stronger sub growth and a lower effective tax rate. Our discounted cash flow-derived target price is raised to RM4.15. — Affin IB Research, Jan 20
Maintain add at RM3.99 with revised target price of RM4.15: DiGi ended the year with 8.3 million (+13.4% year-on-year [y-o-y]) prepaid and 1.6 million (+11.7% y-o-y) postpaid subscribers, or total net adds of 1.16 million for FY11. Although blended average revenue per user (ARPU) was relatively lower at RM50 (-3.8% y-o-y — postpaid ARPU was up 1.2% y-o-y), DiGi’s FY11 top line grew 10.3% y-o-y to RM5.9 billion.
However, DiGi booked in accelerated depreciation charges of RM430 million resulting in a spike in depreciation charges to RM1.2 billion (+51% y-o-y) leading to a slightly weaker FY11 core net profit growth of 7.4% y-o-y to RM1.2 billion. Notwithstanding, FY11 results were 9% and 8% above our and street forecasts due to a lower than expected tax charge arising from a tax incentive. This will be recovered over a period of five years from FY09 to FY13. Dividend per share (DPS) for 4QFY11 amounted to 6.5 sen, totalling 17.5 sen for FY11 (ahead of our 16.3 sen forecast).
Sequentially, 4QFY11 net profit rose 34.8% to RM394.2 million largely due to a positive tax charge as a result of the tax incentive. At the pre-tax level, earnings were lower by 2.3% quarter-on-quarter (q-o-q) to RM389.3 million, largely due to higher depreciation charges (accelerated depreciation charges of RM150 million).
Ebitda margins showed healthy improvement, rising to 47.1% in 4Q from 46.6% in 3QFY11. This was driven by continued strong revenue growth due to improved coverage coupled with cost reductions. Revenue improvement was also largely underpinned by service revenue (+1.9% q-o-q). DiGi added 264,000 prepaid customers and 39,000 postpaid subs). Handset sales for 4QFY11 were lower by 2.5% q-o-q to RM78 million as customers held back for the iPhone 4S.
Management is guiding for mid to high single digit revenue growth for FY12, and expects growth to be ahead of industry (about 5%). The strong Ebitda margins in 4QFY11 are expected to improve further in FY12 or to sustain at least. Capex for FY12 is expected to be in the region of RM700 million to RM750 million, above FY11’s RM604 million.
We have raised our FY12/FY13 earnings per share forecast by 7% to 8% to account for management’s more upbeat Ebitda margin guidance, stronger sub growth and a lower effective tax rate. Our discounted cash flow-derived target price is raised to RM4.15. — Affin IB Research, Jan 20
