OSK maintains 'buy' call on DiGi

 

OSK Research believe DiGi is still able to pay out dividends with free cash flow yields projected at 5-6 per cent despite the higher committed capital expenditure on 3G

OSK Research Sdn Bhd has maintained its “buy” recommendation on DiGi.Com Bhd but reduced the target price to RM24.10 from RM25.90.

In a research note released today, OSK said this was to account for heightened competitive margins and on the compression in valuations of regional mobile peers.

“We believe DiGi is still able to pay out dividends with free cash flow yields projected at 5-6 per cent despite the higher committed capital expenditure for financial year 2009 on 3G (third generation),” it said.

OSK said the mobile operator’s wholly owned subsidiary, DiGi Telecommunications Sdn Bhd, has made an initial drawdown of RM200 million on the RM700 million Commercial Paper/Medium Term programme.

“With the move, the company is a step closer to optimising its balance sheet, which the management hopes to achieve over two years,” it said.

OSK said based on its interview with dealers, the mobile number portability has a negligible impact on the operators thus far.

“DiGi seems to be the more preferred brand for subscribers looking to port aside from Celcom,” it said.

It said DiGi has started selling 010 prefix in the market which should provide subscribers with greater numbering options given that the earlier response to the 014 prefix had been lukewarm.

OSK said it believed DiGi was putting the finishing touches to its 3G rollout and a commercial launch was possible although it would prefer to hold back to ensure that all subscribers derive maximum experience after the launch and not saddled with technical issues. — Bernama