KLCI Stock - DIGI / 6947 - 2010 Quarter 3

Market Cap : 777500000*25.4 = 19,748,500,000 (Very Large)
NTA per share : (1403346-870548)/777500 = 0.69
P/BV : 25.4/0.69 = 36.8116
Forecast P/E now : (25.4-1.74)/1.5456 = 15.31 (Moderate)
ROE : 76.48% (High)
DY : 1.74/25.4*100 = 6.85% (High)
Fixed Asset Turnover(4 year) : (1.0439+1.0069+1.0515+1.0295)/4 = 1.033 (High)
Liquidity Ratio : 1315328/2200623 = 0.5977 (Weak)
Receivables Collection Period : (399718+399204)/2/(5224407/365) = 27 days (Good)
My Target Price : 24.73+1.74 = 26.47 (PE 16, EPS 1.5456, DPS 1.74)
My Decision : NOT BUY (unless price around 23)
My Comment : Revenue and profit increasing, good cash flow, high debt but decreased little, navps increased
Technical Support Price : 24.4, 23.9
Risk Rating : LOW
OSK Target Price : 24.4 (27 Oct 10)

My notes based on 2010 quarter 3 report (number in '000):-

- The Group maintained its revenue growth momentum in the current financial period. Total revenue grew by 9% over same period last year notwithstanding the recent reduction in the mobile termination rate (“MTR”). The encouraging revenue growth was largely spurred by increased usage, particularly from data services, in tandem with the encouraging response to our smartphone bundles and mobile broadband offerings currently in the market. The enlarged subscription base of 8.2 million (2009: 7.4 million) also contributed to the increased revenue. The decline in average revenue per user (“ARPU”) to RM53 (2009: RM55) was mainly from competitive price pressures coupled with an adverse impact from the above-mentioned MTR reduction

- Earnings before interest, tax, depreciation and amortisation (“EBITDA”) improved by 10% year-on-year; attributed to the Group‟s on-going operational efficiency (“OE”) initiatives as well as solid revenue growth as previously mentioned. As a result, there was a corresponding increase in EBITDA margin to 44.0% (2009: 43.5%)

- The Group‟s profit before tax (“PBT”) and profit after tax (“PAT”) for the current financial period stood at RM1.1 billion and RM846.0 million respectively (2009: RM1.0 billion and RM754.0 million respectively). The resultant earnings per share (“EPS”) of 108.8 sen were significantly higher than the 97.0 sen reported in same period last year

- The main catalyst for the improved RM1.4 billion total revenue reported during the current quarter (2009: RM1.2 billion) was largely driven by our expansive smartphone portfolio and smart bundles as well as the expanded coverage of our 3G/HSPA network which now spans 11 key market centres in the country. The lower ARPU at RM53 (2009: RM55) was a mirror of the challenges affecting the current financial period, as explained above

- The Group‟s EBITDA and EBITDA margin 43.9% respectively were higher than the 42.7% reported respectively in the same quarter last year. The marked improvement in the EBITDA was a result of cost savings achieved from already executed OE initiatives and higher revenue base in the current quarter; which also contributed to the improvement in EBITDA margin

- Current quarter PBT exceeded the preceding quarter‟s, largely as a result of higher revenues combined with lower handset subsidies partially off-set by increased staff costs from one-off handset subsidies to employees, higher credit loss allowances and negative net impact from the previously-mentioned MTR reduction

- Estimate next 4Q eps after 2010 Q3 result announced = 1.4051*1.1 = 1.5456, estimate PE on current price 25.4 = 15.31(DPS 1.74)
- Estimate next 4Q eps after 2010 Q2 result announced = 1.3254*1.1 = 1.4579(10% grow from 1.3254), estimate highest/lowest PE = 15.85/13.04 (DPS 1.99)
- Estimate next 4Q eps after 2010 Q1 result announced = 1.3254(3% grow from 1.2868), estimate highest/lowest PE = 16.27/15.01 (DPS 2.13)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.317*4 = 1.268, estimate highest/lowest PE = 17.21/15.82 (DPS 1.78)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.3139*4 = 1.2556, estimate highest/lowest PE = 16.27/15.47 (DPS 1.77)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.3016*4 = 1.2064, estimate highest/lowest PE = 17.12/16.21 (DPS 1.75)
- Estimate next 4Q eps after 2009 Q1 result announced = 0.3543*4 = 1.4172, estimate highest/lowest PE = 15.51/14.1 (DPS 1.62)

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