Alliance Research upgrades DiGi upgrades to Trading Buy

by **Cals** Wed 10 Apr 2013, 12:27

Alliance Research upgrades DiGi upgrades to Trading Buy
Business & Markets 2013
Written by Chong Jin Hun of theedgemalaysia.com
Wednesday, 10 April 2013 11:51

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KUALA LUMPUR (April 10): Alliance Research Sdn Bhd has upgraded DIGI.COM BHD [] to "trading buy" from "neutral" as value emerges in the beaten-down telecommunication stock.

In a note, Alliance analyst Toh Woo Kim said current prices of DiGi shares are attractive entry levels to capitalise on the latter's defensive qualities and earnings prospects.

"We like DiGi as we believe it offers both the defensiveness during pre-election period as well as potential upside post-election from passing on the 6% service tax to prepaid subscribers and possibility of capital management initiatives.

"Share price has underperformed in 1Q13, having declined by -12.0% due to profit-taking activities, which makes current entry price an attractive opportunity for investors to accumulate," Toh said.

At 11.40am, DiGI shares rose one sen to RM4.64 with some 1.5 million shares done.

Bloomberg data show that over the last six months, the stock had traded at an intraday high of RM5.48 on October 19, 2012 before falling to a low of RM4.38 on March 19, 2013.

According to Alliance's Toh which has a target price of RM4.95 for DiGi, the latter has the highest percentage of revenue generated from prepaid subscribers in the industry.

Hence, DiGi is expected to benefit the most should the proposed 6% service tax is passed on to prepaid customers after the general election.

DiGi has guided for a 5% to 7% revenue growth in financial year ended December 31, 2013. This is ahead of the firm's growth forecast of between 4% and 5% for the industry.