KUALA LUMPUR, July 15 — Digi.Com Bhd’s share price rose four sen or 0.9 per cent to close at RM4.37 today although the company reported a 26.8 per cent contraction in second-quarter net profit to RM288.04 million.
Overall, its net profit for the first-half (H1) ended June 30, 2020, fell to RM620.03 million from RM733.98 million a year earlier.
Research houses have mixed views on the company’s performance. Maybank IB Research and Affin Hwang Capital said the H1 2020 results were in line with their expectations while MIDF Research saw Digi’s financial performance as below its estimates.
Citing the performance as “not so bad”, Maybank IB Research said it was maintaining its forecast of Digi’s target price at RM4.40 (hold).
For financial year 2020 (FY20), it expected the telecommunications company to record slightly lower revenue of RM6.27 billion against about RM6.30 billion forecast earlier, while core net profit was likely at RM1.3 billion from RM1.43 billion previously.
Affin Hwang Capital maintained its earnings forecast at RM4.60 (hold) with revenue and core net profit for FY20 at RM6.02 billion and RM1.31 billion, respectively.
“Key upside risk is stronger service revenue growth, downside risks are stronger competition and lower-than-expected quarterly earnings,” it said in a note today.
Meanwhile, MIDF Research said it had revised down its earnings estimates for FY20, FY21 and FY22 by about nine per cent — 14 per cent to RM1.18 billion, RM1.24 billion and RM1.32 billion, respectively.
“We are revising our earnings estimates downward as we assume higher operating cost as well as higher depreciation and amortisation expenses, leading to lower profit margin assumption,” it said.
MIDF Research has also reduced Digi’s target price to RM3.95 from RM4.30 (neutral).
“We view that the group’s earnings would not return to 2019 level in the foreseeable term. This would also affect the dividend payment.
“Given the subdued earnings outlook, we opine that dividend yield would come in lower at below four per cent,” it added.
Premised on Digi’s management guidance, MIDF Research believes the company’s second half 2020 capital expenditure would mimic its H1 2020 spending pattern.
In Q2 2020, the company spent RM225 million to support 4G Plus network roll-out acceleration for capacity upgrades, fibre network expansion and traffic management.
It invested RM139 million capital expenditure for network enhancements in the first quarter 2020. — Bernama
