by Venu Puthankattil. Posted on January 19, 2012, Thursday
Elaborating on this, Kenanga Investment Bank Bhd (Kenanga Investment) analyst Cheow Ming Liang told The Borneo Post, “We are expecting DiGi’s revenue to record 10.2 per cent year-on-year (y-o-y) growth in FY11, underpinned by a strong data revenue growth.
“Data revenue accounted for 28.2 per cent of the group’s total turnover in the first nine months of FY11 and we would not be surprised if the segment contribution surpasses 30 per cent on a full-year basis.
“We also expect the company to declare a 3.7 sen final dividend, bringing the full-year dividends to 14.7 sen or a dividend yield of 3.8 per cent,” he said.
In contrast to Cheow’s forecast, DiGi was expecting its revenue to grow by the mid to high single digit in FY12 with further improvement in cost efficiency.
The diminished earnings figure for FY11, representing an 8.1 per cent decline year-on-year (y-o-y) would be as a result of accelerated depreciation cost on its network modernisation since the second quarter of FY11.
Digi had started its network modernisation project since December 2011 and was targeting to complete it by year-end. Upon completion, all Digi’s network sites would be Long Term Evolution (LTE) equipped and effectively cover 95.8 per cent of all Malaysians.
DiGi guided its FY11 capital expenditure (capex) is RM550 million. For FY12 to FY13 capex, it will likely to provide guidance during the fourth quarter result announcement, the analyst stated.
Cheow opined that DiGi’s full year earnings before interest, tax, depreciation and amortisation (EBITDA) margin should come in at the 46 to 46.5 per cent level as compared with 44.4 per cent in FY10 due to better cost efficiency and higher revenue growth.
On a normalised basis, he expected DiGi to record a net profit of RM1.3 billion (up 10.8 per cent y-o-y) in FY11. However, it did not rule out an upside surprise still as DiGi’s fourth quarter performance tended to be the best quarter of the financial year.
While not expecting the company to announce any special dividend or capital repayment in the fourth quarter, Cheow expected it to provide a clearer time frame on its capital distribution of RM509 million (or 6.5 sen per share) that was announced in September 2011.
DiGi had started its network upgrading plan since December 2011 and this would continue throughout 2012. The company currently had 5,000 base stations in the nation and planned to upgrade an average of 400 sites per month.
Upon completion, all its network sites would be LTE equipped and ready to deliver fibre-like speeds to support its upcoming LTE mobile devices. Digi defined LTE as having download speeds of up to 300 megabits per second (Mbps) and upload speeds of up to 75 Mbps.
When asked if DiGi was ahead of the pack in the telecommunications (telco) sector in terms of upgrading to LTE, Cheow opined, “Not really, as all the telcos are in the midst of upgrading their networks. The financial impact for LTE is unclear at this juncture as it will need to depend on their marketing strategies and pricing plans going forward.
“Also, in order to launch LTE services in FY13, telcos will need to get a spectrum/licence from the Malaysian Communications and Multimedia Commission first before moving to the next step.
“Data revenue will increase progressively when telcos increase its efforts in that segment. For voice revenue, our view on this segment is it will likely to record stable or flattish growth going forward,” the analyst said.
Cheow made no changes FY11 to FY13 earnings forecasts for the time being, pending the company’s upcoming fourth quarter FY11 results scheduled for release on January 19 this year. As such, he maintained the target price at RM3.76 per share.
