CIMB Research maintains Hold on DiGi.com, trims target to RM5.20

TheEdge Tue, Jan 24, 2017 11:22am - 7 years View Original


KUALA LUMPUR (Jan 24): CIMB research has maintained its "Hold" rating on DiGi.com Bhd with a lower target price of RM5.20 (from RM5.30), after factoring in spectrum payments and lower capex.

In a note dated Jan 23, the research house said financial year ended Dec 31, 2016 (FY16)  were in line, as earnings before interest, tax, depreciation and amortisation (EBITDA)/core earnings per share (EPS) formed 100%/98% of consensus and house forecasts.  

“For FY17, DiGi is guiding for flat service revenue and EBITDA margin, with capex/sales at 11% to 13% (RM685 million to RM809 million).”

CIMB Research said it has largely kept its FY17F/FY18F core EPS, after the FY16 results. The research house forecasts core EPS to inch up 0.6%/1.9% in FY17F/FY18F and then grow a faster 6.5% in FY19F, due to higher service revenue and lower amortisation upon the renewal of its 3G-2100MHz license.

“We have cut our capex assumption by 11% to RM800 million per annum across our 10-year discounted cash flow (DCF) period, in line with DiGi’s FY17 guidance.”

“We maintain a Hold rating on DiGi with 1.9% lower DCF-based target price of RM5.20 (weighted average cost of capital, WACC: 7.0%). This is after factoring in spectrum payments for 2600/2100MHz in FY17F/18F and lower capex,” CIMB Research wrote.

“While DiGi’s FY17F enterprise value (EV)/ operational free cash flow of 18.2 times is pricey (ASEAN average: about 15.2 times), it is supported by FY16 to FY18F dividend yields of 4.3% to 4.7% per annum,” it added.

CIMB Research said DiGi is its preferred Malaysian telco pick.

At 11am, shares of DiGi rose 1 sen or 0.2% to RM4.93, with 941,300 shares transacted, for a market capitalisation of RM38.33 billion.

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