• Overview. 4Q19 core profit (pre-MFRS 16) fell 6% yoy and 5% qoq as gains from revenue was negated by higher material cost coupled with increase in net finance cost.
• Key highlights. 4Q19 blended ARPU improved to RM41 on the back of continuous growth in data revenue for both postpaid and prepaid segments. Despite declining trend in prepaid subscribers, ARPU uplift to RM30, as prepaid internet grew, helped cushion revenue dilution from non-internet.
• Against estimates: inline. FY19 core profit (pre-MFRS 16) declined 3% in tandem with lower contribution from prepaid segment. Overall, core profit was broadly inline with our and consensus’ expectations at 101% and 105% respectively.
• Dividend. A 4.4 sen DPS was declared, bringing FY19 total DPS to 18.2 sen (FY18: 19.2sen) and payout of 99%.
• Outlook. Management remains focused on driving data revenue growth, as well as on structural operating efficiency and ongoing network upgrades to enhance customer experience as Digi is exploring on 5G technology.

• Our call. Maintain HOLD with RM5.00 DCF-derived TP. We believe Digi has better prospect in current environment as competition stabilizes. We expect improved performance, i.e. increased postpaid subscriber base while providing an uplift in ARPU, coupled with cost optimisation. Accumulate on dips.

Source: BIMB Securities Research - 23 Jan 2020