Company background

DiGi.Com, a company listed on the Kuala Lumpur stock exchange, is owned by

Telenor, a Norwegian telecoms group. In 1995, DiGi launched the full digital GSM
1800 business and began operations. GSM 1800 is the first digital mobile service in
Malaysia. DiGi is a leading provider of telecommunications services, providing
innovative telecommunications services and is committed to providing reliable high-
speed Internet access to Malaysia's national users. At the same time DiGi strives to be
a sustainable enterprise.

Since January 2008, Ole Martin Gunhildsbu has been the chief technology officer of
DiGi. He has been in various technical management positions in the communications
and IT industry and has rich experience. In the following, he talks about the
challenges DiGi faces, its business strategy, and its collaboration with zte.

I think DiGi has A good position in the Malaysian mobile market. DiGi was small in
its infancy and encountered a series of challenges. Then the Norwegian telecoms
group took over DiGi. DiGi is currently third in Malaysia behind Celcom and Maxis.
In some areas, DiGi is almost in the lead. In Malaysia, the three operators have a
different revenue and user market share, and DiGi has a mobile market share of about
37 per cent.

DiGi's business strategy has been aimed at the youth market. We are known for
offering affordable services and want to maintain that reputation while aggressively
expanding into youth markets and data markets. In general, we offer a variety of
Internet businesses and want to cover as many users as possible in Malaysia. The
youth market is a good place to start.

the Telenor group has been modernising its network strategically and adopting the
sole supplier in some markets. There are some disadvantages to adopting the only
supplier, but there are also many opportunities to develop tacit understanding with the
only supplier. For example, we can know the end-to-end progress of the project and
build a long-term solid partnership with the supplier.

In cooperation with zte, our network modernization is about to be completed. DiGi

and zte have been working hard to modernize the network. We have a lot to do in this
market, but we're a little bit behind Celcom and Maxis in terms of 3G coverage. LTE
is also important for DiGi's future.

we don't confine ourselves to the sole supplier strategy, but we don't reject it either. If
we can build good partnerships and make good deals, we will consider the only
supplier. Many other companies will not adopt the sole supplier, but we may still be. I
think our method is more practical. It is impossible for an independent company to
adopt a sole supplier. Only the group will adopt it. If a supplier does not perform well
in our market, it will also affect the other business units of the group.

cyber security does not necessarily pose A challenge in this way, and one of the major
challenges for us is how to provide the best solution for our users. This means we
must provide the best, safest products and provide a wide range of coverage. Our
users are concerned about whether their data is safe for us. Ensuring customer first is
our main objective.

we have to reinvent every portable network DiGi, because some technology is not
zte's technology. Currently, 85% of the network has been converted to using zte
technology. I think the main challenge is how to cut the user experience without
compromising the user experience. When problems arise, users are immediately
affected.

not only is MCMC monitoring service quality, I think users are becoming more and
more concerned about service quality, and more emphasis on service quality than ever
before. They want the operators to provide better service, and we should adhere to the
concept of user first. We want to make sure that our services progress every year. I am
committed to modernizing our entire network to make DiGi more competitive in the
process of moving to the digital age.

in the past few years, Telenor has launched LTE services in some of the Nordic
countries. Within Telenor, we have a strong market and technical community where
people share experiences. We ensure that employees from different countries can
share their experiences and maximize their effectiveness.

I think zte's products are definitely competitive, but there is room for improvement in
project planning, management and delivery.

DiGi's cooperation with zte has faced some challenges. We have made a few
adjustments to the way of work and found a better way to cooperate. The project is
progressing smoothly. I think zte is very aware of its deficiencies and knows where to
improve. If zte really can sum up and learn the experience of different projects, I think
zte will have a bright future. is human cost improving in Malaysia? Is this the reason
DiGi introduced foreign technology?

at the moment, I don't think the price of local labor is really A problem for us.
Compared with European operators, our operating costs are high but labor costs are
within the control range. Our strategy is not to do simple and repetitive things, such as
network maintenance, to outsource to suppliers. I believe that suppliers have we don't
have the skills and abilities, such as a supplier to Malaysia more than one operator to
provide services, which makes it might have we don't have skills. Therefore, we strive
to balance the provision of operational services and managed services. DiGi will
continue to work with suppliers who have the skills and capabilities we need.
Price ratios

1) Price-to-earnings Ratio (P/E)

P/E ratio reflects the confidence of the market . It is the ratio between the

market price per Share and Earning per Share

Formula = P/E Ratio = Price per Share / Earning per Share
Price to sales ratio for the year ended August 2016 = 14.58/1.31

= 11.13
Price to sales ratio for the year ended August 2015 = 14.42/1.35

= 10.68
The price to earnings ratio has increased from 10.68 in the year 2015 to 11.13

in the year 2016. Therefore , there is only a slightly improvement for DIGI

COMMUNICATE berhad

2) Price-to-sales Ratio
Price-to-sales Ratio is the price an individual would pay to company to

generate volume of sales within a year .

Formula :
Price per share / Sales per Share
Price to sales ratio for the year ended April 2016 = 14.58/7.87
=1.85
Price to sales ratio for the year ended April 2015 = 14.42/ 8.21
= 1.76

3) Price-to-book Ratio (P/B)

Formula

Price per share / Book Value per share

Price to book ratio for the year ended April 2016 = 14.58 / 9.78 = 1.49

Price to book ratio for the year ended April 2015 = 14.42 / 9.87 = 1.46

ProfitabilityRatios

1) Return on Assets (ROA)

Every company buys assets. Assets can be categorized into two category

which is non- current assets and current assets . Non-current assets

 including buildings, land etc whereas current assets including vehicles ,

inventory , machinery and so on . Example of Return on Assets (ROA) : if

a company purchases RM 1million assets and it is able to produce RM

100,000 in net income ,, the company is said to have an (ROA) of 10% . A

higher ROAbetter than lower ROA .

Return on Asset (ROA) = Net income / Average Total Assets

Net income 2016= 7368 million
Average total assets = 132902 million
ROA = 5.54
Net income 2015 = 6118 million
Average total assets = 117135 million
ROA = 5.22

2) Return on Equity (ROE)

If a company want to know about the average return on the companys

capital distribution from stockholders , return on equity (ROE) can be used

to measure it . For example , if company is able to generate RM 50,000 in

income of RM 500,000 in average owner equity , then it registers a (ROE)

of 10%.
ROE is calculated by the following formula :
ROE = net income / average stockholder equity
Net income 2016 = 7368 million
Average stockholder equity = 52389 million
ROE = 14.06

Net income 2015 = 6118 million

Average stockholder equity =47208 million
ROE=13

3) Net Profit Margin

 If a company want to measure the profit after all expenses is subtracted ,

net profit margin calculation can be used .The formula as follow :

Net Profit Margin = net income / revenue
Net income 2016 = 7368 million
Revenue 2016 = 44532 million
NP Margin = 16.55

Net income 2015 = 6118 million

Revenue 2015 = 43287 million
NP Margin = 14.13

Liquidity Ratios

1) Current Ratio

Current ratio = Current Assets / Current liabilities

Current Assets at 2016 = 26616 million

Current Liabilities at 2016 =16760 million

=1.59

Current Assets at 2015 = 18657 million

Current Liabilities at 2015 = 16393 million

=1.14

DIGI COMMUNICATE berhad is a healthy company as it having a high

current ratio. Value bigger than 1.0 is favorable than less than 1 .

2) Quick Ratio
Quick ratio is also known as acid- test ratio . This ratio registers short term

assets versus long term assets with a very significant omission known as

inventory . The calculation as follow :

 Quick ratio = (Current Assets Inventory ) / Current Liabilities
In year 2016 ,
Current Assets = 26616 million
Inventory = 792
Current liabilities =16760 million
Quick ratio = 1.54
In year 2015 ,
Current Assets = 18657 million
Inventory = 844
Current liabilities = 16393 million
Quick ratio = 1.09

Debt Ratios

1) Debt-to-equity ratio

The ratio shows what percentage the total debt constitutes of equity . It

is concerned with companys long-term stability . It is calculated as

Debt-to-equity ratio = Total liabilities / Total Shareholder Equity

In year 2016 ,

Total liabilities = 79283

Total shareholder equity = 52389

Debt-to-equity ratio = 1.51

In year 2015 ,

Total liabilities = 68658

Total shareholder equity = 47208

Debt-to-equity ratio =1.45

2) Interest coverage Ratio

 This is the ratio between Operating Income and interest expense and it

gives the times interest expense is earned , which means the number of

times Operating Income covers the interest payable .

Interest Coverage ratio = Operating income / Interest expense

In year 2016 ,

Operating income = 7974 million

Interest expense = 959 million

Interest coverage ratio = 8.31

In year 2015 ,

Operating income = 7033 million

Interest expense = 821 million

Interest coverage ratio = 8.57

Efficiency Ratios

1) Asset turnover ratio

High asset turnover ratio mean that company has high revenue , this ratio

can recognize how efficient a company promote sales by using its assets .
Asset turnover ratio = sales / Average total assets
In year 2016 ,
Sales = 44532 million
Average total assets = 132902 million
Asset turnover ratio = 0.34
In year 2015 ,
Sales = 43287 million
Average total assets = 117135 million
Asset turnover ratio = 0.37
2) Inventory Turnover Ratio
 It gives us the number of times inventory is turned over in a financial

year . It tells how efficiently the firm converts inventory into sales . It is

calculated by dividing sales by average inventory . Some analysis use the

cost of goods sold to calculate this ratio . The later one is more realistic .
Inventory Turnover = Cost of goods sold / Average Inventory
In year 2016 ,
Cost of. Goods sold =32243million
Average Inventory = 792 million
Inventory Turnover =40.71
In year 2015 ,
Cost of. Goods sold = 32390 million
Average Inventory = 844 million
Inventory Turnover = 38.38
SUMMARY ANALYSIS
We can ensure that DIGI COMMUNICATE berhad is a stable firm based

on the evidence that gathered in this task . The financial situation of DIGI

COMMUNICATE berhad also stable , its profit is always positive . From

the financial analysis , it shown that there are slightly increase in price-to-

earnings ratio ,price-to-sale ratio and price-to-book ratio. Current ratio of

DIGI COMMUNICATE berhad is bigger than 1 , which mean it is a

healthy company that able to pay short-term debts . However , there are no

big improvement for DIGI COMMUNICATE berhad from year 2015 to

year 2016 , so the company needs to manages its finance more efficiently ,

more investors will interesting on it .

REFERENCES
1) Bursa Stock Search , retrieved from http://www.malaysiastock.biz/Stock-

Search.aspx?search=5347
2) Financial statement of DIGI COMMUNICATE berhad , retrieved from

http://www.malaysiastock.biz/GetReport.aspx?file=2017/7/27/5347%20-

%201717160917189.pdf&name=Announcement%20Q3%20FY2017.pdf
3) Income statement of DIGI COMMUNICATE berhad , retrieved from

http://quotes.wsj.com/MY/XKLS/DIGI/financials/annual/income-statement
4) Balance sheet of DIGI COMMUNICATE berhad, retrieved from

http://quotes.wsj.com/MY/XKLS/DIGI/financials/annual/balance-sheet
5) Cash flow of DIGI COMMUNICATE berhad , retrieved from

http://quotes.wsj.com/MY/XKLS/DIGI/financials/annual/cash-flow
6) http://www.zte.com.cn/cndata/magazine/zte_technologies/2013/8_2013/magaz

ine/201308/t20130820_403969.html
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