KLCI Stock - DIGI / 6947 - 2011 Quarter 2

Company Info

Market Capital (Capital Size)	23,200,600,000 (Very Large)
Par Value	RM 0.10

My Analysis

Forecast P/E now	(29.84-1.72)/1.79 = 15.71 (Moderate)
Target Price	28.64+1.72 = 30.36 (PE 16.0, EPS 1.79, DPS 1.72)
Decision	Not interested unless revenue and profit increase more
Comment	Revenue increased 2.6% and is continuous increasing since FY09Q2 and also is highest all the time(higher than preceding year corresponding quarter 10%), eps decreased 28.7% and is second consecutive quarter decreasing and also lower than preceding year corresponding quarter 28.8%, cash generated from operating is more than enough to cover all expenses, weaker liquidity ratio at weak level now, higher gearing rato at very high level now, as usual high payables turnover period
First Support Price	29.5
Second Support Price	28.5
Risk Rating	MODERATE

Research House

UOB Target Price	30.2 (2011-04-15)
ECM Target Price	30.14 (2011-05-03)
HLG Target Price	29.2 (2011-05-03)
HwangDBS Target Price	30.4 (2011-05-03)
Maybank Target Price	30 (2011-05-03)
MIDF Target Price	30 (2011-05-03)
OSK Target Price	29.2 (2011-05-03)
RHB Target Price	30 (2011-05-03)
BNP Paribas Target Price	30.7 (2011-05-04)
CIMB Target Price	34 (2011-07-13)
AMMB Target Price	27.35 (2011-07-15)

Accounting Ratio

Return on Equity	90.85%
Dividend Yield	5.56%
Profit Margin	22.16%
Tax Rate	27.35%
Asset Turnover	1.1519
Net Asset Value Per Share	1.6
Net Tangible Asset per share	0.61
Price/Net Tangible Asset Per Share	48.92
Cash Per Share	1.31
Liquidity Current Ratio	0.5012
Liquidity Quick Ratio	0.4867
Liquidity Cash Ratio	0.3406
Gearing Debt to Equity Ratio	2.9583
Gearing Debt to Asset Ratio	0.7474
Working capital per thousand Ringgit sale	-26.2%
Days to sell the inventory	5
Days to collect the receivables	28
Days to pay the payables	235

My notes based on 2011 quarter 2 report (number in '000):-
- Higher revenue than FY10Q2 mainly by strong data revenue momentum across all revenue streams, particularly from both mobile internet and broadband which grew by 131% year-on-year in tandem with the continued high take-up of device bundles. Higher handsets sales also contributed to the healthy revenue growth

- There was a decline in average revenue per user (“ARPU”) from RM53 in the previous financial period to RM50 in the current financial period, from the cumulative effect of newly-acquired subscribers with lower spending, margin pressure from increased competition and lower domestic interconnect revenue resulting from the downward revision in regulated mobile termination rate which took-effect from July 2010

- Lower pbt than FY10Q2 & FY11Q1 mainly due to accelerated depreciation totalling RM145.5 million with regard to future de-commissioning of existing telecommunications network assets, in anticipation of the on-going network modernisation as well as infrastructure sharing arrangement with Celcom. The effect of the accelerated depreciation was further compounded by a one-off premium of RM16.6 million payable to noteholders for the early-redemption of MTN I and II slated for completion in July 2011

- Estimate next 4Q eps after 2011 Q2 result announced = 0.4262*4*1.05 = 1.79, estimate PE on current price 28.84 = 15.71(DPS 1.72)
- Estimate next 4Q eps after 2011 Q1 result announced = 0.4262*4 = 1.7048, estimate highest/lowest PE = 16.6/15.31 (DPS 1.72)
- Estimate next 4Q eps after 2010 Q4 result announced = 1.5151*1.1 = 1.6666, estimate highest/lowest PE = 17.42/14.85 (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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