Affin Research maintains "Buy" call on DiGi, target price RM5.39

Published: Tuesday June 18, 2013 MYT 9:19:00 AM

Affin Research maintains "Buy" call on DiGi, target price RM5.39

KUALA LUMPUR: Affin Research is maintaining is “Buy” call on DiGi.com Bhd with a lower target price of RM5.39 from RM5.76 after raising its capital expenditure assumptions to incorporate higher spending for its Long Term Evolution network within the next two years.

Affin said it remains positive on DiGi's stock will continue to gain revenue market share as it penetrates the ethnic Malays segment, suburban market and East Coast markets which are the three key growth areas for the company.

“A key catalyst to its growth will be via the expansion of its 3G footprint, which will reach more than 75% of the population by end financial year 2013 from 67% as at end financial year 2012. Simultaneously, DiGi is keeping a tab on its key stronghold the youth and migrant segments,' it said.

Affin expects DiGi to grow its revenue market share where in 1Q13, DiGi's revenue market share was 28.4%, up from 27.9% in 1Q12.

We believe that DiGi's growth in its share of revenue has been attributed to a combination of its growing migrant segment and strong youth segment. Key areas of weakness for DiGi has however been centred around the sub-urban markets, East Coast of Peninsular Malaysia, East Malaysia and the business/SME segment. Nevertheless, these areas have slowly been addressed over the last one to two years, largely explaining DiGi's continued growth in market share,” it said.

It added it expects cost benefits from the DiGi-Celcom joint venture to aid margin improvement as key savings will likely materialise via its fibre network as opposed to site consolidation as expected earlier.

“Upon completion of the 5,500km fibre backbone, DiGi would be less dependent on third party suppliers of network capacity. We understand that this will add up to the bandied cost savings to the tune of RM2.2bil over a 10-year period,” it said.