INVESTMENT HIGHLIGHTS

• Improvement in postpaid and device revenue led to +2.1%yoy improvement in 1Q18 normalised earnings
• Double digit growth in postpaid revenue driven by +17.5yoy increase in postpaid subscriber
• Attrition of non-internet prepaid subscriber (-18.1%yoy) negatively impacted the prepaid segment
• Maintain NEUTRAL with a revised target price of RM4.70sen per share

Supported by revenue growth in postpaid. Digi.com Bhd (Digi) reported 1Q18 earnings of RM386.1m. Excluding the impact on MFRS15, the reported earnings would have come in lower at RM352.0m. The normalised 1Q18 earnings amounted to RM383.5m, a marginal increase of +2.1%yoy. The improvement in earnings was mainly led by the growth in postpaid segment and higher devices revenue. All in, Digi’s 1Q18 financial performance came in within ours and consensus expectation expectations, accounting for 27.3% and 26.0% of FY18 full year earnings estimates respectively.

Steady growth in the postpaid segment. 1Q18 postpaid revenue climbed by +13.7%yoy to RM591m. The improvement in postpaid takeup rate was supported by the positive traction from the Digi Postpaid Family plans, ‘Gboost’ proposition and ‘Thank you’ campaign. ARPU remained resilient at RM77 per month, supported by strong subscriptions for multi-sims plans and continued prepaid to postpaid conversions. This lead to +17.5%yoy expansions in postpaid customer base to 2.6m subscribers.

Quarterly prepaid revenue fell below RM900m. The prepaid revenue declined at slower pace of -6.4%yoy to RM891m from RM952 as at 1Q17. The lower revenue was attributable to -4.2%yoy decreased in subscriber base to 9.2m, which are mainly stemming from the noninternet subscriber. Meanwhile, ARPU remain stable at RM32 per month.

Source: MIDF Research - 16 Apr 2018