Highlights

Digi.Com - New prepaid campaign starting from RM30

Date: 12/11/2020

Source  :  AmInvest
Stock  :  DIGI       Price Target  :  4.40      |      Price Call  :  HOLD
        Last Price  :  4.20      |      Upside/Downside  :  +0.20 (4.76%)
 


  • We retain our HOLD rating on Digi.Com with unchanged forecasts and DCF-based fair value of RM4.40/share. This is based on a WACC of 6.3% and terminal growth rate of 2%, which implies an FY20F EV/EBITDA of 12x — in line with its 2-year average together with a supportive dividend yield of 4%.
  • In conjunction with its 11.11 promotion, Digi has introduced two prepaid options on a limited time campaign that have no speed restrictions starting from RM30/month.
  • The RM30 plan offers unlimited calls to all networks and 20GB of data with no speed caps. This can be topped up with RM5 for a RM35 plan that offers 40GB of high-speed data.
  • In addition, Digi also offers data plan boosters with top ups of RM3 for 1.5GB or RM10 for 10GB of data. The plan boosters will follow your monthly plan validity.
  • Under the current campaign, subscribers can get an extra RM11 rebate by activating the plan from 11 to 21 November 2020.
  • In our view, these new plans offer better value compared to Digi’s current RM35 Chili Padi package which offers only 9GB/month of uncapped speeds with unlimited access to Facebook, Twitter and Instagram.
  • Nevertheless, Digi RM15/month package with a quota of 3GB remains attractive for entry-level and migrant users, notwithstanding average data usage is currently much higher at 17.4GB/month.
  • Even so, these plans could still face stiff competition from U Mobile’s RM30 prepaid package which offers unlimited data and 6GB hotspot with speed cap of 6Mbps. Its RM35/month option includes unlimited calls.
  • Even U Mobile’s RM40/month postpaid plan which offers unlimited data and calls appears attractive compared to Digi’s prepaid options.
  • Given U Mobile’s improving service quality and connectivity, the company is currently the nearest rival to Digi’s affordable market proposition.
  • As such, we expect fresh offerings, likely in the postpaid category, following this campaign, which closely follows Digi’s recent bundling home fibre plans priced from RM130/month with unlimited postpaid plans for an additional RM60/month.
  • Nevertheless, given contracting data yields across the sector, we do not expect these new prepaid options to make any significant change in the trajectory of an increasingly competitive celco landscape.
  • The stock currently trades at a fair FY21F EV/EBITDA of 11x – slightly below its 2-year average of 12x with decent dividend yield of 4%.

Source: AmInvest Research - 12 Nov 2020

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Labels: DIGI

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DIGI 4.20 -0.04 (0.94%) 1,948,600 

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