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Tuesday, July 12, 2016

DIGI: Earnings Recovering

Result Update

For QE30/6/2016, Digi's net profit rose 5% q-o-q but dropped 9% y-o-y to RM421 million while revenue was unchanged q-o-q but down 4% y-o-y to RM1.655 billion. Revenue dropped marginally y-o-y due to intense competition. PBT improved q-o-q due to lower depreciation in current quarter as compared to accelerated depreciation booked in the last 2 quarters.


Table: Digi's last 8 quarterly results

We can see that profits and profit margins are starting to recover!


Chart 1: Digi's last 35 quarterly results

Valuation

Digi (closed at RM4.75 yesterday) is now trading at a trailing PE of 23 times (based on last 4 quarters' EPS of 20.56 sen). In the absence of earnings growth, DIGI's high PER is hard to justify. The only consolation is its decent dividend yield of 4.3%.

Technical Outlook

DIGI is in an intermediate downtrend line, RR since it peaked at RM6.50 in February 2015. The resistance from the downtrend line is at RM4.80. Until it can break above this mark, DIGI is likely to remain in downtrend. However, this downtrend is not likely to exceed the April low as the earnings of the company is recovering.

 
Chart 2: Digi's weekly chart as at Jul 11, 2016 (Source: Shareinvestor.com Tradesignum)

Nevertheless, Digi is in a long-term uptrend line with support at  RM4.30 In April.


Chart 3: Digi's monthly chart as at Jul 11, 2016 Feb 6, 2014 (Source: Shareinvestor.com Tradesignum)

Conclusion

Based on unattractive valuation & mildly negative short-term technical outlook, Digi is rated a HOLD.

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.

3 comments:

TFMoney said...

Hi bro. Please comment on LBALUM. LBALUM can buy at current level ?

Alex Lu said...

Hi TFMoney

I was wondering why you like my opinion on LBALUM until I discovered that I'd posted about it in Dec 2013.

LBAlum is a profitable company with EPS of 6.3 sen for FY2016. At 62.5 sen, LBAlum is trading at a PER of 10x. That's a fair value, with limited upside.

In April, LBAlum broke above its downtrend that dates back to August 2014. It is now testing the horizontal resistance at RM0.62-0.63. It's in an uptrend, with weekly MACD above the zero line and +DMI above the -DMI. Momentum is strong with ADX is above 20.

LBAlum looks bullish notwithstanding the limited upside in term of valuation.

TFMoney said...

Thx bro for ur comment. No much stock can buy in this market.