DIALOG (7277) - Dialog Group - Barrels ahead with new records
Target RM1.92 (Stock Rating: ADD)
4QFY14 core net profit grew 0.8% qoq (-7.5% yoy). FY14 core net profit was in line, forming 99%/100% of CIMB/consensus estimates. Service revenue growth picked up in 4Q14, driven by mobile Internet and positive seasonality. As expected, a 7.2 sen final DPS was declared (payout: 100%), bringing YTD DPS to 26 sen. We raise our FY15-16 earnings forecasts by 3.9-4.9% to factor in stronger mobile Internet revenues. Post-earnings revision, we raise our DCF-based target price (WACC: 7.0%) by 6.9% to RM6.20. We maintain our Hold rating on DiGi as we believe its current valuations offer a fair risk-reward profile, given potentially more intense competition in FY15. For ASEAN telcos, we prefer Telkom Indonesia, SingTel and Thaicom.
Service revenue growth picked up in 4Q14
Service revenue growth in 4Q14 picked up to 2.7% qoq (+3.2% yoy) on positive seasonality and continued growth in mobile Internet (+6.9% qoq, +37.9% yoy). Mobile Internet users rose faster than expected by 7.2% qoq (+32.1% yoy) to 6.2m, or 54.4% of its subscriber base. This was driven by bundled device offerings and rollout of its 3G/4G networks, which hit population coverage of 86%/32% as at end-2014. The expanded user base should contribute towards greater mobile Internet monetisation in FY15-16. As such, we have raised our revenue growth forecast for FY15/16 to 7.2%/4.5% (4.9%/3.8% previously).
EBITDA margin eases on higher opex
EBITDA margin eased 0.6% pt qoq (-1.5% pts yoy) to 44.8% in 4Q14 due to higher device (iPhone 6 launch), marketing and network expansion costs, as well as staff bonus provisions. For FY14, DiGi achieved its target of sustaining EBITDA margin at c.45%. For FY15/16, we forecast EBITDA margin to expand 1.5%/0.8% pts yoy, as the additional revenues from the passing-through of the 6% GST to prepaid users will flow straight down to the bottomline.
Conservative FY15 management guidance
DiGi has guided for low to mid single-digit service revenue growth and a steady EBITDA margin in FY15. While we expect more intense competition this year, we believe management’s guidance is conservative given the positive GST impact. DiGi’s capex guidance of RM900m is higher than our previous expectation of RM800m. The sustained high capex will go towards expanding its 4G coverage to 50% by year-end and for fibre investments.
Source: CIMB Daybreak - 10 February 2015
Target RM1.92 (Stock Rating: ADD)
4QFY14 core net profit grew 0.8% qoq (-7.5% yoy). FY14 core net profit was in line, forming 99%/100% of CIMB/consensus estimates. Service revenue growth picked up in 4Q14, driven by mobile Internet and positive seasonality. As expected, a 7.2 sen final DPS was declared (payout: 100%), bringing YTD DPS to 26 sen. We raise our FY15-16 earnings forecasts by 3.9-4.9% to factor in stronger mobile Internet revenues. Post-earnings revision, we raise our DCF-based target price (WACC: 7.0%) by 6.9% to RM6.20. We maintain our Hold rating on DiGi as we believe its current valuations offer a fair risk-reward profile, given potentially more intense competition in FY15. For ASEAN telcos, we prefer Telkom Indonesia, SingTel and Thaicom.
Service revenue growth picked up in 4Q14
Service revenue growth in 4Q14 picked up to 2.7% qoq (+3.2% yoy) on positive seasonality and continued growth in mobile Internet (+6.9% qoq, +37.9% yoy). Mobile Internet users rose faster than expected by 7.2% qoq (+32.1% yoy) to 6.2m, or 54.4% of its subscriber base. This was driven by bundled device offerings and rollout of its 3G/4G networks, which hit population coverage of 86%/32% as at end-2014. The expanded user base should contribute towards greater mobile Internet monetisation in FY15-16. As such, we have raised our revenue growth forecast for FY15/16 to 7.2%/4.5% (4.9%/3.8% previously).
EBITDA margin eases on higher opex
EBITDA margin eased 0.6% pt qoq (-1.5% pts yoy) to 44.8% in 4Q14 due to higher device (iPhone 6 launch), marketing and network expansion costs, as well as staff bonus provisions. For FY14, DiGi achieved its target of sustaining EBITDA margin at c.45%. For FY15/16, we forecast EBITDA margin to expand 1.5%/0.8% pts yoy, as the additional revenues from the passing-through of the 6% GST to prepaid users will flow straight down to the bottomline.
Conservative FY15 management guidance
DiGi has guided for low to mid single-digit service revenue growth and a steady EBITDA margin in FY15. While we expect more intense competition this year, we believe management’s guidance is conservative given the positive GST impact. DiGi’s capex guidance of RM900m is higher than our previous expectation of RM800m. The sustained high capex will go towards expanding its 4G coverage to 50% by year-end and for fibre investments.
Source: CIMB Daybreak - 10 February 2015
