This is a personal weblog, reflecting my personal views and not the views of anyone or any organization, which I may be affiliated to. All information provided here, including recommendations (if any), should be treated for informational purposes only. The author should not be held liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein.
Thursday, February 07, 2013
Digi- Bottom-line slid further
Results Update
For QE31/12/2012, Digi's net profit dropped by 22% q-o-q or 37% y-o-y to RM246 million while revenue increased by 3% q-o-q or 5% y-o-y to RM1.63 billion. The decline in net profit q-o-q basis was attributed to higher accelerated depreciation from network modernization, which was partially off-set by lower operating costs incurred from the Group’s continued cost optimization focus.
Table: Digi's last 8 quarterly results
However, if you look at Chart 1 below, we can see that Digi's bottom-line has been flattish for 5 years. This is due to a steady slide in its profit margin- with pre-tax profit margin dropping from 33% to 22% & net profit margin sliding from 25% to 15% from QE31/12/2007 to QE31/12/2012.
Chart 1: Digi's last 21 quarterly results
Valuation
Digi (closed at RM4.66 yesterday) is now trading at a PE of 30 times (based on last 4 quarters' EPS of 15.51 sen). At this multiple, Digi is deemed overvalued.
Technical Outlook
From the chart below, it seems that Digi has made a temporary top. Its immediate support is at the horizontal line at RM4.60. The next support is at the horizontal line at RM4.00.
Chart 2: Digi's weekly chart as at Feb 6, 2013 (Source: quickcharts)
Conclusion
Based on the decline in its financial performance, unattractive valuation & negative technical outlook, Digi is rated a SELL.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Digi.
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