MIDF Research maintains Buy on DiGi, raises target price

by **Cals** Fri 07 Feb 2014, 09:42

Business & Markets 2014

Written by theedgemalaysia.com

Friday, 07 February 2014 08:39

KUALA LUMPUR (Feb 7): MIDF Research has maintained buy on DiGi.Com at RM4.85 with a higher target price of RM6.33 (from RM6.23) and said that with its full scale modernised network, the company would be in a better position to capture larger subscriber base.
In a note Friday, the research house said DiGi posted a strong 2013 core earnings growth of 41.4% to RM1.7 billion.
It said this rise in earnings was mainly attributable to higher EBIT margin of 32%, in comparison to 25% in the previous year.
MIDF Research said this was partly brought about by lower depreciation and amortization expenses, which declined by more than one third to RM878.1 million (2012: RM1.3 billion).
The company also booked lower effective tax rate of 20% as compared to 24.2% in 2012, it said.
The research house said there was also no let down in operating profit margin expansion, adding this would in turn will lift the expectation of higher dividend being declared.
MIDF Research said while the company was still tight-lipped on its business trust proposal, this could be an additional sweetener which could further unlock the value of the company.
“Following our revision in earnings estimate, our target price has been tweaked slightly higher to RM6.33 from RM6.23 previously due to higher dividend projection.
“Our valuation methodology is based on Discounted Dividend Model with an estimated long term long –term dividend payout of ratio of 100% and required rate of return of 7.56%,” it said.