Digi.Com sees lower earnings in 3Q, declares 3.4 sen dividend

KUALA LUMPUR (Oct 20): Digi.Com Bhd (Digi) saw its net profit for the third quarter ended Sept 30, 2022 (3QFY2022) drop 15.45% to RM264.48 million from RM312.82 million a year ago, mainly due to the tax provision from the prosperity tax and higher net finance costs, coupled with higher net loss on fixed assets written off and disposed of as well as lower interest income.

As a result, earnings per share fell to 3.4 sen in 3QFY2022, from 4.02 sen 3QFY2021.

In a Bursa Malaysia filing on Thursday (Oct 20), Digi noted that the group’s effective tax rate of 30.4% for the current quarter and 35.4% for the financial period ended Sept 30, 2022 are above the statutory tax rate of 24% due to current tax and deferred tax impacts arising from the prosperity tax, which is the one-off tax measure as gazetted by the government.

It added that the group’s earnings before interest, tax, depreciation and amortisation (Ebitda) declined by 4.9% as flow through from softer topline development in a challenging market, driven mainly by the conclusion of the Jaringan Prihatin programme, increased investments catering to IT and network modernisation. The decline is also due to some inflationary pressures and non-recurring merger-related costs.

Quarterly revenue fell marginally to RM1.53 billion from RM1.58 billion in 3QFY2021 as total service revenue declined by 1.8% year-on-year (y-o-y) despite robust postpaid, business-to-business (B2B) and fibre growth.

“Prepaid revenue was down 6.7% as the recent strong recovery of the migrant segment was unable to compensate for the impact from the end of the Jaringan Prihatin programme where we fared encouragingly well since its inception,” it said.

The weak 3QFY2022 earnings dragged Digi’s net profit for the cumulative nine-month period (9MFY2022) lower by 15.96% to RM720.67 million from RM857.55 million a year earlier, while revenue was down 3.38% to RM4.59 billion from RM4.75 billion in 9MFY2021.

Despite the fall in earnings, Digi declared a third interim dividend of 3.4 sen for the financial year ending Dec 31, 2022, payable on Dec 16. This brings total dividends for the year to 9.1 sen versus 11 sen in the same period a year ago.

In a separate statement, Digi said consumers’ demand for data continued to surge, as evidenced by the company’s data traffic growth of 6.2% y-o-y, with monthly average data per user reaching 23GB.

To support the demand for high-speed internet connectivity, a total of RM173 million capital expenditure (capex), or capex-to-total-revenue ratio of 11.3%, was invested in the quarter under review to further improve its network quality and coverage.

Digi’s average download speeds surpassed 45Mbps from 44.1Mbps in the last quarter, while its 4G LTE network coverage now serves 95% of populated areas nationwide and its LTE-A network coverage 80%, alongside an extensive fibre network of 10,372km across the nation.

Postpaid subscribers grew for the eighth consecutive quarter, with 164,000 y-o-y net additions to a total of 3.4 million subscribers, and its prepaid base also strengthened, with 177,000 y-o-y net additions to 7.3 million subscribers, attributed to the encouraging recovery of the migrant base combined with continued good growth within the Malaysian segment.

Blended average revenue per user (ARPU), however, declined RM2.50 y-o-y to RM40, mainly due to the impact of lower prepaid ARPU as the Jaringan Prihatin programme ended.

“We see continued demand for mobile services across all segments. Looking ahead, with macro-economic uncertainties such as risks of a global recession weighing on the market, we will remain disciplined in cost management, while continuing to invest in strategic growth areas, network improvements, and modernisation agenda.

“Discussions related to 5G access agreements with relevant parties are progressing well, and we are also looking forward to completing the proposed Celcom-Digi merger this year,” said Digi’s acting chief executive officer and chief marketing officer Praveen Rajan.

At noon break, Digi’s share price was 11 sen or 3.25% higher at RM3.49, giving the group a market capitalisation of RM27.1 billion.