Journey to Wealth
Digi.Com - Near term catalysts priced in
Period 9M12/3Q12
Actual vs. Expectations The 9M12 NP of RM960.2m (+11.7% YoY) was marginally below our expectations and accounted for 73.4% and 72.6% of ours and the street's full-year estimates, respectively.
Dividends Declared a third interim net dividend of 4.0 sen and a surprise one-off special net dividend of 8.0 sen, which came from the two capital management initiatives announced previously. Both the dividend ex-dates have been set as 8 November.
Key Result Highlights YoY, the 9M12 revenue rose by 7.1%, driven by higher data and service revenues. NP rose 11.7% due to the better cost measures and a lower effective tax rate.
QoQ, the revenue was flat at +0.2% to RM1.58b on the back of 'lost revenue opportunities' arising from its ongoing network modernisation. The prolonged postswap optimisation, particularly in the Klang Valley, had negatively affected voice revenues by about RM40m-RM50m in 3Q12. The flattish revenue and higher cost of services and marketing costs resulted in a 2.5% QoQ drop in the NP.
The 3Q12 EBITDA margin fell to 45.2% (2Q12: 47.6%) as a result of the 'lost revenue opportunities' and the IDD margin pressure. Nevertheless, Digi is confident of achieving a full year FY12 EBITDA margin similar to that of FY11.
The 75k net adds in 3Q12 (2Q12: 293k) comprised of 67k new prepaid users and 8k from the postpaid segment. Prepaid ARPU was flat at RM41 while postpaid ARPU fell to RM82 (2Q12: RM85).
Data revenue accounted for 31.3% (2Q12: 30.3%) of Digi's service revenue, which stood at RM1.47b. Smartphone users account for 24.8% (2Q12: 23.5%) of its total 10.3m subscriber base.
Outlook Digi maintained its FY12 earnings guidance (mid-tohigh single digit revenue growth and a 46s% EBITDA margin). It expects revenue to grow 5%-7% in FY13 with a sustainable EBITDA margin.
Change to Forecasts Lowered FY12-FY14 NP by -0.3% to -1.1% after raising our cost of material and marketing cost assumptions.
Increased FY12 DPS forecast to 28.1 sen (from 23.3 sen previously) while lowering our FY13 DPS to 22.1 sen from 28.5 sen previously.
Rating Downgraded to UNDERPERFORM
Valuation Our TP has been reduced to RM4.95 (from RM5.20 previously) based on a lower targeted FY13 EV/forward EBITDA of 11.8x (+2.0SD).
Risks Spectrum re-farming , access pricing, etc.
Source: Kenanga
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