KLCI Stock - DIGI / 6947 - 2010 Quarter 4

Company Info

Market Capital (Capital Size)	19,904,000,000 (Very Large)
Par Value	RM 0.10

My Analysis

Forecast P/E now	(25.6-1.63)/1.6666 = 14.38 (Moderate)
Target Price	26.67+1.63 = 28.30 (PE 16.0, EPS 1.6666, DPS 1.63)
Decision	BUY
Comment	Revenue is highest all the time, eps same with revenue, free cash flow increasing and got positive net cash flow, weak liquidity ratio, very high gearing rato, as usual very high payables period, rising demand of mobile broadband and mobile internet access on handsets, network collaboration with Celcom
First Support Price	24.5
Second Support Price	24.0
Risk Rating	MODERATE

Research House

MIDF Target Price	28 (2011-01-19)
UOB Target Price	27.9 (2011-01-25)
CIMB Target Price	27 (2011-01-26)
OSK Target Price	27.9 (2011-01-31)

Accounting Ratio

Return on Equity	87.48%
Dividend Yield	6.37%
Profit Margin	31.50%
Tax Rate	26.27%
Asset Turnover	1.0525
Net Asset Value Per Share	1.73
Net Tangible Asset per share	0.64
Price/Net Tangible Asset Per Share	39.53
Cash Per Share	1.09
Liquidity Current Ratio	0.5858
Liquidity Quick Ratio	0.5669
Liquidity Cash Ratio	0.3744
Gearing Debt to Equity Ratio	2.8145
Gearing Debt to Asset Ratio	0.7378
Working capital per thousand Ringgit sale	-17.4%
Days to sell the inventory	5
Days to collect the receivables	30
Days to pay the payables	262

My notes based on 2010 quarter 4 report (number in '000):-
- Total revenue of RM1.4 billion in the current quarter was 15% higher than that reported in the 4th Quarter 2009; largely attributed to handset bundles and increased data usage as well as a larger subscriber base. ARPU however, was lower at RM51 (2009: RM54) due mainly to increased competition on international traffic, a higher proportion of on-net traffic plus the MTR reduction which took effect at the start of 3rd Quarter 2010

- Current quarter EBITDA and EBITDA margin of RM653.4 million and 45.7% respectively compared to RM531.2 million and 42.6% reported respectively in the preceding year‟s same quarter. The significant improvements in both the EBITDA and EBITDA margin were largely a result of cost savings achieved from on-going OE initiatives as well as the increased revenue base in 4th Quarter 2010

- The Group‟s PBT and PAT for the current quarter were equally impressive at RM450.3 million and RM332.0 million respectively (2009: RM336.9 million and RM246.5 million respectively). Consequently, EPS in 4th Quarter 2010 was 42.7 sen; a significant jump from 31.7 sen as reported in the previous year‟s same quarter

- When compared against the immediate preceding quarter, PBT of the Group of RM450.3 million improved by 15%. The main contributors to this increase were higher revenues coming through from increased take-up on smartphone bundles, as well as continued traction in data revenues and OE-initiated reduction in operating expenses

- Estimate next 4Q eps after 2010 Q4 result announced = 1.5151*1.1 = 1.6666, estimate PE on current price 25.6 = 14.38(DPS 1.63)
- Estimate next 4Q eps after 2010 Q3 result announced = 1.4051*1.1 = 1.5456, estimate highest/lowest PE = 15.11/12.46 (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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