DIGI: Lower Profits On Better Revenue

Result Update

For QE31/12/2016, DIGI's net profit dropped 14.5% q-o-q or 2% y-o-y to RM375 million while revenue was mixed - up 3% q-o-q but down 3% y-o-y to RM1.67 billion. Revenue rose marginally q-o-q due to solid postpaid growth momentum and stronger internet adoption which offset weaker prepaid business. While EBITDA & PBT dropped q-o-q after accounting for associated cost for the higher device sales, increased marketing cost in supporting subscriber acquisition and progressive network expansion cost. Nevertheless EBITDA margin remained robust at 44% following strong operational efficiency discipline and well-managed cost structure.


Table: DIGI's last 8 quarterly results

Despite the decline in profits and profit margins last quarter - the fourth quarter is normally a weaker quarter - we can see the net profit number was not too far from the RM400 million mark.


Graph: DIGI's last 39 quarterly results

Valuation

DIGI (closed at RM4.92 yesterday) is now trading at a trailing PER of 23 times (based on last 4 quarters' EPS of 21.0 sen). DIGI's high PER is somewhat mitigated by decent dividend yield of 4.2%.

Technical Outlook

DIGI broke above its intermediate downtrend line at RM4.90 in August last year. Since then, it had traded sideways between RM4.80 & RM5.00. The last time it traded sideways after a breakout of a downtrend line was from September 2013 to February 2014 - between RM4.00 & RM4.30. After it broke to the upside of that range, it rallied all the way to RM6.00-6.20. (Note: DIGI actually broke down in January 2014 before it broke up!) 

 
Chart 1: Digi's weekly chart as at Jan 23, 2017 (Source: MalaysiaStock.Biz)


Chart 2: Digi's monthly chart as at Jan 23, 2017 (Source: MalaysiaStock.Biz)

Conclusion

Despite the relatively high PER, Digi is rated a HOLD based on improved performance over the past few quarters (albeit weaker one in QE31/12/2016), decent dividend yield and mildly positive technical outlook. 

Note:
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