Harimau Capital

DiGi records solid growth and strengthens internet foothold in 2011

Poised for stronger delivery of ‘Internet For All’ mission

Steady mobile data revenue growth fueled DiGi.Com Berhad to a strong finish in 2011, with mobile data revenue exceeding 30% of the Group’s overall service revenues in the fourth quarter of 2011. The Group sustained top line growth across 2011 with revenue for the year improving by 10.3% to RM6.0 billion, while EBITDA was RM2.8 billion, at a margin of 46.4%.  Revenue growth for the year was driven by an enlarged customer base of 9.9 million, higher voice and data usage, and increased take-up of bundled offerings of smartphones and devices.

DiGi’s Chief Executive Officer Henrik Clausen said, “Our Internet for All proposition continues to spur mobile data usage driven by new data-light and tablet plans, an attractive device portfolio, and reenergized and expanded customer touch-points. We are pleased to be gaining good traction as the smarter choice for mobile internet, as seen from increased data penetration amongst our customers. We now have 5.2 million active mobile internet users.”

For the year under review, DiGi stepped up its capex investment to RM610 million from the projected RM550 million to accelerate site roll-outs and increase capacity. DiGi also grew operating cashflow to RM2.2 billion.

“As part of our commitment to continue delivering best in class mobile internet services, we have started putting in place a brand-new, LTE-ready network which will enable us to continue delivering a robust mobile internet usage experience at fibre-like speeds to more Malaysians. In addition, we remain committed to exploring industry collaboration aimed at further reducing network operating costs, and to drive improvements in our network quality and coverage," Clausen added.

DiGi will pay a fourth interim tax exempt dividend of 6.5 sen per ordinary share for the financial year ended 31 December 2011. 

Q411 key highlights: Another solid growth quarter

DiGi reported another set of strong results in Q411; a quarter marked by sustained top-line growth that came with record high EBITDA margin and high net earnings.  All revenue segments recorded good growth.  Against general expectations of saturation, voice revenue grew for the third successive quarter.
Mobile broadband/mobile internet revenue grew 6.2% q-o-q and now accounts for more than 30% of our service revenue. SMS and value-added services (VAS) also generated higher revenue this quarter.  

Revenue drivers include smart bundles with in-demand smartphones/devices, higher penetration of smart phones in our subscriber base in addition to a larger subscriber base and festivities.  At the end of Q411, 20% (Q3: 18%) of our customers were smart-phone users, on a total customer base of close to 10
million.

Continual focus on operational efficiency resulted in further improvement in EBITDA and EBITDA margin to RM728 million (Q3: RM708 million) and 47.1% (Q3: 46.6%) respectively. Operational cash-flow (OpCF) in Q411 was slightly lower at RM420 million (Q3: RM563 million) on higher q-o-q capex spend of RM308 million (Q3: RM146 million).

Net profit was high in Q411, rising by 34.9% to RM394 million (Q3:RM292 million) and this was mainly due to tax incentives related to mobile broadband network facilities. DiGi declared a fourth dividend  of net 6.5 sen/share, taking the full year dividend to 17.5 sen/net per share.

Moving Forward

All in all, DiGi delivered a solid performance in 2011, with strong double digit y-o-y growth in both revenues and earnings on the back of improved margins and robust operating cash-flow. In 2012, DiGi believes the telecommunications sector will continue to do well on the back of continuous demand growth.  Whilst voice services might experience some slowdown, demand for quality data services will remain high from growing dependency on mobile internet access for work and play and higher adoption of smart devices.

Although the Group is mindful of potential economic weakness, DiGi intends to keep growing faster than the industry, and in this respect the Group believes it has the right strategies, network and resources in place to support this ambition. DiGi aims to launch LTE services as early as practically possible to support our ambition to remain the customers’ smarter choice for mobile internet. DiGi is also working with various partners to bring relevant content and applications to its customers.

Being part of the Telenor global group of companies, DiGi has significant leverage to be realised in terms ofcommercialising new technologies, services and network upgrades. DiGi’s priorities in the short to medium term are to expand its mobile internet revenue base, continue to leverage on the success of its cost savings initiatives to maintain margins going forward as well as optimising network collaboration/modernisation to strengthen competitiveness.  DiGi aims to keep delivering strong returns to itsshareholders. The Group’s preliminary 2012 guidance is given in the adjacent table.

Read the full report here.