A more upbeat outlook
FY21 results were in line with our/consensus forecasts as softer 4Q21 EBITDA was offset by lower tax. For FY22 ex-5G, management is guiding for stable EBITDA (on positive revenue momentum) and capex intensity. Maintain HOLD with a lower DCF-based TP of MYR4.00 (-7%). We prefer TM (T MK, BUY, CP: MYR5.02, TP: MYR7.40) in the telco space.
Results in line
Digi’s 4Q21 net profit of MYR305m (+9% YoY, -3% QoQ) brings FY21 net profit to MYR1,162m (-5% YoY), 100% of both our and consensus full-year forecasts respectively. Service revenue and thus EBITDA declined sequentially, but was offset by QoQ lower tax expense. A final interim DPS of 3.9sen was declared (+8% YoY, -3% QoQ), again representing c.100% payout ratio for the quarter.
Softer revenue trends
4Q21 service revenue declined by 1.6% QoQ (-2.1% YoY), with prepaid revenue being affected by service disruptions in Oct 2021 (customer billing platform), and weaker market momentum (conclusion of PRIHATIN packages). Postpaid revenue declined marginally QoQ on lower ARPU. Meanwhile, costs were higher sequentially on higher COGS (higher device costs) and advertising costs. Consequently, 4Q21 EBITDA margin contracted by 3.0ppt QoQ to 46.7%. Digi recorded lower tax due to positive adjustments in deferred tax (tax penalties and Cukai Makmur).
Maintain HOLD
For FY22, management expects 1) EBITDA to remain stable YoY, with higher service revenue being offset by higher opex and, 2) capex-torevenue to remain stable YoY. We raise our FY22/23 net profit forecasts by 6%/11% respectively on higher revenue assumptions (FY22 includes 11% impact from Cukai Makmur), and introduce FY24 forecasts. Our TP (DCF-based assuming 6.8% WACC, 2% LT growth, and includes possible cost synergies) is lowered to MYR4.00 (from MYR4.30) as we incorporate higher capex in line with guidance.