PublicInvest maintains trading buy on Digi
Updated: Jul 18, 2018
KUALA LUMPUR: PublicInvest Research has maintained its trading buy call on Digi.Com Bhd given its 21x forward price-earnings with an attractive dividend yield of about 5%.
It said valuations for the telco sector has fallen by about 17% to 23X forward price-earnings in recent months due to weak global market sentiment as well as challenges facing Malaysian telcos.
However, PublicInvest believes Digi is the least affected of the Malaysian telcos as it is a mobile player with limited exposure to home broadband services.
In its 2QFY17 earnings results announced on Friday, Digi reported a 7.1% increase in net profit to RM384.3mil, which came in within the research house's expectations.
"The stronger earnings were mainly due to higher postpaid revenue as subscriber base jumped 15.8% YoY on a slight decline in ARPU while costs were lower," said PublicInvest.
The research house noted that service revenue improved 2.1% on year due to an increase in postpaid revenue outpacing the decline in prepaid revenue.
Postpaid revenue rose 15.5% year-on-year due to a higher subscriber base on a slightly lower average revenue per user (ARPU). Prepaid revenue on the other hand fell 5.7% on year as its customer base continued to shrink.
ARPU remained stable at RM32 while device sales and other revenue increased 3% year-on-year due to stronger demand for device bundles.