Research houses maintain ‘neutral’, ‘hold’ calls on Digi

Research houses maintain ‘neutral’, ‘hold’ calls on Digi

KUALA LUMPUR,. Most of the research houses have maintained their “neutral”, or “hold” calls, with unchanged target prices on Digi.com Bhd even after the telecommunications company recorded a lower net profit for the third quarter ended September 30, 2019 (Q3 2019).

The research houses said this was because the company’s performance was in line with their expectations.

In a filing with Bursa Malaysia last Friday, Digi said its net profit for Q3 2019 fell to RM356.1 million from RM392.54 million in the same period last year due to the declining revenue to RM1.56 billion from RM1.59 billion previously.

Its nine months ended September 30 (M9 2019) net profit declined to RM1.09 billion from RM1.17 billion previously, due to a lower revenue of RM4.62 billion versus RM4.85 billion a year earlier.

The company also declared a third interim dividend per share of 4.5 sen or RM350 million, payable to shareholders on December 19, 2019.

In a note today, MIDF Amanah Investment Bank Bhd Research (MIDF Research) maintained its “neutral” rating on Digi with an unchanged target price of RM4.93, as the M9 2019 normalised earnings of RM1.09 billion was in line with its expectation.

“We expect higher contribution from the prepaid-to-postpaid conversion, and business to business lead to better earnings visibility in comparison to prepaid,” it said.

At present, MIDF Research said the proportion of postpaid revenue as a percentage of total service revenue has improved further to 47.1 per cent from 41.9 per cent a year ago.

“Given the steady postpaid performance, we expect the contribution from postpaid to match that of prepaid by 2020,” it said, adding that the estimated dividend yield of at least four per cent would keep investors remain vested on the stock.

However, the research house expected contribution from prepaid to disappoint further in the second half of 2019 in view of the challenging market, which could potentially undermine the growth stemming from postpaid.

Public Investment Bank Bhd also reiterated a “neutral” call on Digi with a 12-month target price of RM4.72, as it said the M9 2019 results were in line with expectations, accounting for 72 per cent and 75 per cent of consensus and its full-year estimates, respectively.

Meanwhile, Affin Hwang Capital Research has maintained its “hold” call on Digi, with an unchanged target price of RM4.55, as it said overall, the company’s results were within its forecasts, but a tad below market expectations and AllianceDBS Research also maintain its “hold” call with an unchanged target price of RM4.80.

At 11.25am, Digi’s share price slipped four sen to RM4.65 with 42,800 shares changing hands. — Bernama

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