BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Wednesday, 2 May, 2012

Company Update

Digi.com
RM495m Capital Distribution
Stock Data
Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Financial Derivatives DIGI MK 31,411.0 Equity 7,775.0 4.32 2.78 9,020,634 33.5% Y n.a.

Buy
Price: Target Price:
7.5 4.1% 2.6% 0.8 49.0% 16.0%

RM4.04 (6.4% Upside) RM4.30

Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders
Telenor Asa EPF

Share Performance (%) Absolute vs. KLCI Financial Highlights FY 31 Dec (RMm) 2009 Turnover 4,909.6 EBITDA 2,124.6 Pretax profit 1,366.5 Core Net Profit 1,000.5 EPS (sen) 12.9 PER (x) 31.4 DPS (sen) 17.8 Div. Yield (%) 4.4% NTA/share (RM) 0.07 EBITDA margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBITDA Pretax profit Core Net profit EPS Share Price Chart
4.50

1mth 2.0 35.8

3mth 0.1 (4.6)

12mth 46.3 35.8

Digi announced a capital distribution of RM495m or 6.4sen per share to shareholders expected to be completed by 1QFY13. DiGi aims to complete the rollout of its new unified mobile network capable of delivering 2G, 3G and 4G/LTE from a single base station site by end 2012. We maintain our FY12 and FY13 net earnings forecasts. A first interim dividend of 5 sen is proposed and we are raising our FY12 dividend forecast from 18sen to 20sen, translating into yield of 5%. Target price is unchanged at RM4.30. Maintain BUY.
Increased customer base. DiGi added 16,000 new customers in 1QFY12 (4QFY11: 303k). The net addition of new customers were lower than the previous quarter due to high churn resulting from seasonally high net additions in the previous quarters. In terms of mobile internet customers, DiGi continued to report a higher number of small screen users, which totalled 5.3m at the end of 1Q12, against 5.2m at the end of 4Q11. Prepaid and postpaid ARPU remains stable at RM41 and RM85 respectively (4QFY11: RM42 & RM86 respectively) Regulatory updates. Digi is still waiting for the final decision from Malaysian Communications and Multimedia Commission (MCMC) on the final allocation for the 2600 MHz spectrum. As for the other spectrum bands including the 900 MHz and 1800 MHz, DiGi has yet to receive any news with regard to the re-allocation process. Digi has commenced physical Radio Access Network (RAN) swap in 4Q11, on target to complete the network swap by end-2012. New unified mobile network soon by end 2012. DiGi aims to complete the rollout of its new unified mobile network; The Tomorrow Network; capable of delivering 2G, 3G and 4G/LTE from a single base station site by the end of 2012. This will enable the swift rollout of 4G/LTE services once the necessary spectrum is made available, bringing high-speed internet and next generation services to more Malaysians through larger coverage. Maintaining our forecast. We are maintaining our FY12 and FY13 net earnings at RM1,328.9m and RM1,400.2m respectively. Increasing our dividend forecast. Digi proposed a first interim dividend of 5.9sen (tax exempt). With this, we are raising our FY12 dividend forecast from 18sen to 20sen for FY12 translating into yield of 5%. On top of this, Digi announced a capital distribution of RM495m or 6.4sen per share to shareholders expected to be completed by 1QFY13. Maintain BUY. Our target price is unchanged at RM4.30, using DCF methodology (WACC assumption 8.6%). Coupled with dividend yield of 5% and share price upside of 6.4%, the stock could offers potential total return of 11.4%, and we maintain our BUY recommendation on Digi.

2010 5,406.5 2,411.4 1,597.2 1,178.0 15.2 26.7 16.3 4.0% 0.06 44.6% 29.5% 26.2% 87.5% 22.9% 0.2

2011 5,964.0 2,764.9 1,560.3 1,254.4 16.1 25.0 17.5 4.3% 0.09 46.4% 26.2% 19.6% 88.9% 25.8% net cash

2012E 6,571.1 3,086.9 1,725.4 1,328.9 17.1 23.6 20.0 5.0% 0.08 47.0% 26.3% 23.0% 102.4% 27.4% net cash

2013E 7,205.4 3,313.4 1,818.6 1,400.2 18.0 22.4 26.4 6.5% 0.01 46.0% 25.2% 23.0% 262.7% 31.1% net cash

43.3% 27.8% 26.8% 65.8% 21.1% 0.3

2.0% -2.1% -11.7% -12.3% -12.3%

10.1% 13.5% 16.9% 17.7% 17.7%

10.3% 14.7% -2.3% 6.5% 6.5%

10.2% 11.6% 10.6% 5.9% 5.9%

9.7% 7.3% 5.4% 5.4% 5.4%

4.00
3.50

3.00
2.50

2.00 May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

The Research Team research@bimbsec.com.my 03-26918887 ext 111

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2 May 2012

Company Update: Digi.com

Income Statement
FY 31 Dec (RMm) Revenue EBITDA Pretax profit Tax MI Core Net Profit EPS (sen) EPS growth (%) DPS (sen) NTA/ share (RM) Net gearing (x) PER (x) Div. yield (%) P/ NTA (x) ROE (%) ROA (%) 2009 4,909.6 2,124.6 1,366.5 (366.0) 0.0 1,000.5 12.9 -12.3% 17.8 0.07 0.3 31.4 4.4% 55.0 65.8% 21.1% 2010 5,406.5 2,411.4 1,597.2 (419.2) 0.0 1,178.0 15.2 17.7% 16.3 0.06 0.2 26.7 4.0% 62.7 87.5% 22.9% 2011 5,964.0 2,764.9 1,560.3 (305.9) 0.0 1,254.4 16.1 6.5% 17.5 0.09 net cash 25.0 4.3% 46.2 88.9% 25.8% 2012E 2013E 6,571.1 7,205.4 3,086.9 3,313.4 1,725.4 1,818.6 (396.5) (418.4) 0.0 0.0 1,328.9 1,400.2 17.1 18.0 5.9% 5.4% 20.0 26.4 0.08 0.01 net cash net cash 23.6 22.4 5.0% 6.5% 51.6 284.0 102.4% 262.7% 27.4% 31.1% Source: BIMB Securities

Balance Sheet
FY 31 Dec (RMm) Non Current Assets Current Assets Total Assets Current Liabilities Non Current Liabilities Shareholders' Fund Minority Interests Equity & Liabilities 2009 3,858.3 874.1 4,732.4 2,025.8 1,185.2 1,521.5 0.0 4,732.4 2010 3,805.9 1,330.8 5,136.6 2,271.6 1,518.4 1,346.6 0.0 5,136.6 2011 3,240.5 1,622.8 4,863.3 2,593.3 858.7 1,411.4 0.0 4,863.3 2012E 2,655.2 2,199.2 4,854.5 2,810.5 858.7 1,185.3 0.0 4,854.5 2013E 2,023.3 2,473.4 4,496.7 3,105.1 858.7 533.0 0.0 4,496.7 Source: BIMB Securities

www.bimbsec.com.my

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2 May 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Company Update: Digi.com

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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