Digi.com Bhd’s 3Q22 revenue and normalised profits were recorded at RM1.53b and RM242m. The decline in earnings was mainly due to Cukai Makmur Prosperity tax and higher net finance costs. Nonetheless, the telco maintained a healthy normalised PAT margin at 15.8%.
However, the group’s normalised profits for 9MFY22 of RM703 million came in below expectations said MIDF, accounting for 61.5% and 69.1% of full earnings estimates. The negative divergence is mostly the result of higher-than-expected tax rate.
Service revenue experienced a marginal drop, reported at RM1.25 billion despite adverse macro trends and the end of Jaringan Prihatin programme. Meanwhile, EBITDA stood at RM736million with a healthy 48.1% margin, attributed to resilient topline development, modernisation initiatives, and efficient cost management. Postpaid revenue increased to RM639 million meanwhile postpaid subscribers grew for the eighth quarter in a row, with 164k add-ons with net additions to a total of 3.4million subscribers. The present postpaid growth has been fueled by increased demand for high-speed subscriptions and attractive bundling family, device, and contract offers. ARPU however has diluted to RM61 following higher entry-level and contracted subscriber base and roaming usages.
As for, prepaid revenue fell -6.7% RM602million as the recent strong recovery of the migrant segment was unable to cushion the impact from the end of Jaringan Prihatin where the Group fared encouragingly excellent since its inception. Yet, the subscriber base increased to 7.3 million on the back of encouraging underlying development from the Juara Internet Malaysiaku campaign and the launch of new Prepaid Unlimited products, which yielded a higher active Prepaid subscriber base for both Malaysian and migrant segments.
In view of this latest earning report, MIDF maintains a neutral call as earnings missed its expectation, the research house also revised its earnings estimates downward between -3.0% to -6.4% and derived a revised target price of RM3.50.
The group also has signed the conditional share subscription agreement for 12.5% equity stake in DNB and accessing the Access Agreement. Potential downside risks include weaker-than-expected earnings, increased mobile competition, and delayed merger completion.
