●Overview. 3Q19 core profit (pre-MFRS 16) fell 7% yoy mainly on weak voice revenue led by prepaid segment coupled with higher effective tax rate. On qoq basis, core profit was down 13% as gains from revenue growth was negated by the higher effective tax rate which rose to 27% (2Q19: 20%).

●Key highlights. While total subs eased in 3Q19, blended ARPU remain stable at RM40. This was supported by continuous growth in data revenue for both postpaid and prepaid segment.

●Against estimates: inline. 9M19 core profit (pre-MFRS 16) fell 4% on weaker revenue from prepaid segment. Overall, core profit were inline with ours and consensus’ expectations at 76% and 78% respectively.

●Dividend. A 4.5 sen DPS was declared, implying 98.4% dividend payout and brings its total DPS to 13.8 sen for 9M19.

●Outlook. Management remains focused on driving postpaid segment, prepaid internet growth and B2B. Operating efficiency remains paramount while network upgrades are ongoing to enhance customer experience.

●Our call. Maintain HOLD with RM5.00 DCF-derived TP as we believe Digi has better prospect in current stable competition on the back of uplift in data monetisation and cost optimisation. Accumulate on dips.

Source: BIMB Securities Research - 21 Oct 2019