9 Things You Have To Know About Digi.com Bhd Before Investing

In May 1995, Digi.com Bhd (Digi) has positioned itself as the first digital mobile service provider in Malaysia as it launched its fully digital GSM1800 services in the country. Since then, through continuous innovation, Digi has evolved into one of the leading mobile operators in Malaysia.

As I write, Digi is worth RM 37.2 billion in market capitalization. It is one of the 30 constituents of the FTSE-KLCI. In this article, I’ll bring an account of Digi’s achievements thus far, the challenges it faces presently and its targets and aspirations in the immediate future.

#1: Stock Symbol

1

Ticker Symbol: KLSE: DIGI / KLSE: 6947
Market Capitalization: RM 37.16 billion (19 October 2017)

Share Price: RM 4.78 (19 October 2017)

Industry: Mobile Telecommunications

Syariah Compliant: Yes

#2: The Business

There are 3 things you need to know about Digi’s business operations. They include:

  1. Licenses
    Presently, Digi has three operating licenses. They include a Network Facilities Provider (NFP) license, a Network Service Provider (NSP) license, and an Application Service Provider (ASP) license. Both the NFP and NSP licenses are valid until January 2025. Meanwhile, the ASP license is renewed every year.
  • Network
    Digi operates 2G, 3G, and 4G-LTE services in Malaysia. Presently, Digi’s 2G network uses spectrums in the 900Mhz and 1800Mhz bands which would expire in 2032. Meanwhile, its 3G and 4G-LTE networks use spectrum in the 2100Mhz and in the 2600Mhz band respectively. The 2100Mhz would expire in 2018 while the 2600Mhz would expire in 2017.
  • Internet Subscribers
    On 5 July 2013, Digi has launched its 4G-LTE services in high traffic locations in the Klang Valley, Johor Bahru and Kota Kinabalu. Since then, Digi has accelerated the expansion of its 4G-LTE network in Malaysia. This includes the extension of its fibre network from over 3,200 km in 2013 to 8,000 km in September 2017. With rising users of smartphones, Digi has grown its number of internet subscribers from 4.9 million in December 2013 to 8.5 million in September 2017.

     
    Source: Investors’ Presentation of Digi.com Bhd

#3: The Financials

Over the last 5 years, Digi has maintained its group revenues and shareholders’ earnings at RM 8.5 – 9.0 billion and RM 1.5 – 2.0 billion a year respectively. Digi has an average 5-Year return on equity (ROE) of 332.31% a year. This means, it has made, on average, RM 332.31 in annual earnings from every RM 100 in shareholders’ equity from 2012 to 2016.


Source: Annual Reports of Digi.com Bhd

#4: Future Outlook

Digi has provided an updated guidance of the financial year 2017. They include:

  1. Low or Middle Single Digit Decline in service revenues.
  2. Maintain 45% in Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin.
  3. Maintain 11% – 13% in capital expenditures (CAPEX) to service revenues ratio.

To achieve the above targets, Digi has continued to enhance its operating efficiencies and expand its 4G Plus network. This includes continuous offering of exclusive online deals and ‘Freedom to Internet’ propositions to mobile customers nationwide.

#5: Competition

The telecommunication industry is highly competitive in Malaysia. Here, I’ll share 3 key things you need to know about the competition Digi is currently facing for consumer dollars in the country.

  1. 2G Network
    Besides Digi, there are two other GSM network operators in Malaysia. They include Maxis Bhd and Celcom, a subsidiary of Axiata Bhd. Both Maxis and Celcom have licenses to operate GSM 900Mhz and GSM 1800Mhz in Malaysia respectively.
  • 3G Network
    Besides Digi, there are three other 3G service providers in Malaysia. They include Maxis, Celcom and U Mobile. Under the terms of spectrum assignments, 3G licence holders are required to offer access of their 3G networks to MVNOs. Presently, Celcom is providing 2G and 3G network access to several MVNOs via roaming agreements. Maxis has a 2G and 3G roaming agreement with U Mobile.
  • 4G-LTE Network
    In December 2012, the Malaysian Communications and Multimedia Commission (MCMC) announced the allocation of the 2600Mhz spectrum band. A total of 8 companies were given access to the band. Besides Digi, these companies include Maxis, Celcom, Packet One Networks, U Mobile, Puncak Semangat, YTL Communications and REDtone Marketing.

#6: Valuation

As I write, Digi is trading at RM 4.78 a share. Over the last 4 quarters, Digi has reported to make RM 0.192 in earnings per share (EPS). As such, Digi’s current P/E Ratio works out to be 24.90. It is marginally higher than P/E Ratio recorded since 2013.

Digi has a track record of declaring and paying out dividends on a quarterly basis. It has dividend payout ratio (DPR) of 95% – 100% as it paid out 95% – 100% of its earnings to its shareholders in the form of dividends. Over the last 4 quarters, Digi has paid out RM 0.19 in dividends per share (DPS). If Digi is able to maintain DPS at RM 0.19, its expected dividend yield is 4.0%.

#7: Major Announcement

On 11 July 2017, Digi has announced the appointment of Lars-ake Norling as Chairman of the board. Norling has succeeded Morten Karlsen Sorby who has been the Chairman of Digi since August 2015.

Norling was first appointed as a non-executive director of Digi in August 2015. Prior to his appointment, Norling had served as Chief Operating Officer for the Fixed Network and Products with Telenor Sweden (2006 – 2007), Chief Technology Officer of Telenor Sweden (2007 – 2009), Chief Executive Officer of Telenor Sweden (2009 – 2014), and Chief Executive Officer of Digi Telecommunications Sdn Bhd (2014 – 2015).

Besides Digi, Norling is currently serving as Telenor Group’s Executive Vice President for Developed Asia Cluster, Director and Chief Executive Officer of Total Access Communication Public Company Ltd.

#8: Investors Relation

For further enquiries on Digi.com Bhd’s Investors Relation matters, you may contact:

Share Registrar:

Tricor Investor & Issuing House Services Sdn Bhd

Address:

Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia

Telephone:

+603 -2783 9299

#9: Major Shareholders

As at 3 March 2017, the top 5 largest shareholders of Digi.com Bhd are:

– Telenor Asia Pte Ltd: 49.00%

– Employees Provident Fund Bhd: 11.10%

– Amanah Saham Bumiputera: 7.17%

– Kumpulan Wang Persaraan (Diperbadankan): 5.14%

– Lembaga Tabung Haji: 1.37%

What Do You Think Of  Digi.com Bhd As An Investment? Will You Invest In It? Share Your Views Below

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ian’s personal capacity. It does not in any way represent those of his employer and other related entities. Ian does not own any companies mentioned.

Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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