Affin Research maintains Buy on DiGi, positive on growth

Published: Wednesday December 11, 2013 MYT 10:17:00 AM 

Updated: Wednesday December 11, 2013 MYT 10:18:38 AM

KUALA LUMPUR: Affin Research maintains its Buy call on DiGi with a target price of RM5.39, it said on Wednesday.

“DiGi remains our preferred pick for the sector given its growth and dividend element. Its improving 3G/LTE coverage and network quality will put DiGi on a more level playing field.

“Any business acquisition will likely be for spectrum but at the right pricing (DiGi will unlikely overpay as it weighs capex vs spectrum acquisition),” it said.

The research house expects DiGi to deliver another year of revenue growth in the mid single digit magnitude underpinned by growth in the postpaid segment, data segment and the LTE service in which DiGi is targeting a population coverage of 50% by 2015.

“Beyond 2014, the implementation of GST would also aid telco operators to pass down (currently absorbed by operators) the 6% government service tax to prepaid users.

“With 65% of revenue derived from the prepaid segment, DiGi stands to be the best beneficiary from GST,” it said.

Affin said execution of a business trust would also enhance DiGi’s capital structure and improve its dividend yields going forward.