Friday, 8 February 2013

Digi higher on solid FY12 results

A solid financial year 2012 (FY12) growth announced yesterday by Digi.Com Bhd saw the company's share price emerging among the top actives at the end of morning trade today.

At lunch-break, the counter rose 12 sen or 2.575 per cent to RM4.78 with 16.473 million units changing hands.

Driven by continued good uptake for its mobile internet services, its revenue for financial year ended Dec 31, 2012 improved 6.7 per cent to RM6.4 billion while earnings before interest, tax, depreciation and amortisation was RM2.9 billion, at a margin of 46.0 per cent.

Hong Leong Investment Bank in a note today however said that Digi’s core net profit of RM1.205 billion for the year was below expectations.

It said this was mainly due to higher cost of goods sold and effective tax rate of 24.2 per cent in the absence of broadband tax incentive.

Hong Leong said the result met 92 per cent of its full year forecast and was shy of the street’s estimate by 25 per cent.

It said the fourth quarter 2012 revenue sales saw growth on the back of stronger data growth traction and improved network performance.

While growth in the mobile internet was cited as positive development, it said competition would be also intense from other players in the field.

Hong Leong adjusted lower the company's financial year 2013 and 2014 earning per share by 18.6 per cent and 12.7 per cent respectively and this downward revision of forecast also prompted a cut in target price by 6.8 per cent to RM4.79 from RM5.14.

RHB Research also reduced its financial year 2013-2014 earnings forecasts by 10-13 per cent following lower-than-expected fourth quarter results and after imputing higher effective tax rates of 24 per cent.

"We recommend a neutral on Digi after revising our fair value to RM5.10 from RM5.40 following the cut in our earnings forecasts.

"We believe its revenue growth momentum is still intact, although margins may potentially come under pressure from handset subsidies." -- Bernama

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