Tuesday, April 23, 2013

DIGI- bottom-line recovered due to lower depreciation

Result Update
For QE31/3/2013, DIGI's net profit rose 34% q-o-q or 2% y-o-y to RM329 million while revenue rose marginally by 1% q-o-q or 5% y-o-y to RM1.647 billion. Improved bottom-line was attributable to lower accelerated depreciation as the network modernisation is coming closer to completion in Q3 2013, and was partially off-set by higher cost of handsets in line with higher take-up of device-bundled offerings.


Table: DIGI's last 8 quarterly results


Chart 1: DIGI's last 22 quarterly results

Valuation

DIGI (closed at RM4.67 yesterday) is now trading at a PE of 30 times (based on last 4 quarters' EPS of 15.62 sen). At this multiple, DIGI is deemed overvalued.


Technical Outlook

While DIGI is still in a long-term uptrend, the indicators have turned down. This is a sign that the stock is likely to trade sideway or lower for a while.


Chart 2: DIGI's monthly chart as at April 23, 2013 (Source: quickcharts)

Conclusion

Based on unattractive valuation & weak 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.

2 comments:

lima said...

Hi Alex,

What is depreciation and how does it affect a company's profit / cash flow or balance sheet in short long term? In looking for long term, is the retained profit important or the ability to give dividend or the company growth rate is more important?

Sultan Mahmood said...

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