Highlights

The purpose of this event was to provide an overview of business strategy in 2014 as well as introduction to its newly refreshed DiGi Management Team (DMT).

Completed full scale network modernization in 3Q13 as this also marked the end of successful technological transformation. Going forward, operation will be business as usual leveraging on the new network infrastructure with enhanced capacity and coverage.

Emphasis / centricity on sales and marketing through key appointments among DMT: long-serving former CMO assumed the role of COO while conventional sales and marketing chief role was split between CMO and CSO.

Captured 38% of youth out of the 1.5m who are eligible under the SKMM smartphone subsidy program which boosted device sales along with data revenue.

Total mobile internet (MI) traffic continued to grow at amazing pace with 125% yoy reaching ~7.5PB (petabyte) in 4Q13, where both prepaid (+211% yoy) and postpaid (+75% yoy) generated almost equal share of traffic load.

Although it has inked the wholesale bandwidth deal with TM, DiGi will stay invested in backhaul transmission in collaboration with Celcom. Data: Business Trust: reiterate the complexity and may need more time. Still in the midst of clarification from the aspect of operation, tax regime and regulatory.

Risks

Irrational competition, difficulty in refarming 1800MHz spectrum for LTE, unable to monetize data revenue, government and regulatory risks.

Forecasts

Maintained.

Rating

Hold, TP: RM4.94

Positives – mobile internet growth, margin improvements through collaborations/sharing, capital management via business trust structure, recoup prepaid tax via GST.

Negatives – Intense competition from U Mobile, MVNOs and OTT players.

Valuation

Reiterate our HOLD call on the stock with unchanged DCF-derived fair value of RM4.94 using WACC of 5.91% and TG of 1.0%.

Source: Hong Leong Investment Bank Research - 11 Feb 2014