Digi – iPhone a potential game changer? Outperform
Visit Note:
- We recently met management and sensed that Digi could be willing to adopt a more aggressive stand in terms of handset subsidies for the iPhone (as well as other smartphones).
- We suspect this could be due to potential factors such as its smaller subscriber base and 3G coverage. If Digi decides to become aggressive in handset subsidies, we believe the other operators would likely follow suit, potentially leading to a shift in the industry landscape. For now, we await further details on pricing.
- Meanwhile, management remained upbeat with the recent iPhone deal and believes that the rising adoption of smartphones and wireless broadband would help drive data traffic ahead.
- Digi’s data revenue currently accounts for around 20% of mobile revenue, behind peers Celcom and Maxis where the contribution is about 30-32.5%. This low base, however, suggests strong upside potential and growth ahead for Digi.
- Finally, further details on Digi’s capital management would only be forthcoming in the coming quarters. In the meantime, Digi’s move towards the payment of quarterly dividends should help provide investors a steady and attractive income stream.
- We have fine-tuned our earnings forecasts, although the impact is relatively insignificant. DCF-derived fair value of RM23.90 and Outperform call maintained.
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