We are adding 3,000 DIGI @ RM4.85 per share to our Thematic and Dividend Yield Portfolios. The group reported its 4Q13 result yesterday where its full-year net profit soared 42% YoY to RM1.7b as a result of stronger uptake of mobile internet services, better-than-expected cost efficiencies and lower depreciation charges. The group also declared a fourth interim NDPS of 7.0 sen which is scheduled to go ex on 19 Feb. Moving forward, we believe the stock key re-rating catalyst is the unveiling of its business trust structure, albeit no timeframe guidance was provided by the management. We also believe that its mobile internet adoption will continue to gain traction among new and existing subscribers post the completion of the network modernization plan. Meanwhile, we also understand that DIGI may consider outsourcing its back-office services, following its parent company Telenor’s footstep, to further enhance its operational efficiency. Should this materialize, we believe it could continue to attract market eyeballs.

DIGI’s share price rebounded from the RM4.60 previous resistance-turned-support level, after its FY13 results announced yesterday surpassed analysts’ expectations. The stock is currently trading on a bullish note, as it stayed above all the short, mid and long-term SMA levels. Readings from the key momentum indicators are suggesting that the stock is likely to attract follow-through buying interest and hence extend its gains over the next few days. We reckon that the bullish momentum will likely carry the share price towards the RM5.00 and possibly to RM5.17. We suggest that traders looking to buy into the stock should aim to take profit 3 bids below a targeted level at RM5.14, while employing a stop loss at RM4.57 (3 bids below RM4.60 support level).

Source: Kenanga