AmInvestment downgrades Digi.Com, lowers fair value to RM4.55

KUALA LUMPUR (April 24): AmInvestment Bank Research has downgraded Digi.Com Bhd to “Hold” at RM4.49 with a lower fair value of RM4.55 (from RM4.70) and said the share price has risen by 15% since its upgrade on March 18 from its 8-year low of RM3.92 to near AmInvestment’s lowered DCF-based fair value.

In a note today, the research house said this is based on WACC of 6.3% and terminal growth rate of 2%, which implies an FY20F EV/EBITDA of 12x — in line with its 2-year average together with a supportive dividend yield of 4%.

“Our lower fair value stems from a 4%–5% reduction in Digi’s FY20F–22F earnings due to higher operating cost assumptions, as its 1QFY20 net profit of RM133 million (-3% y-o-y) came in slightly below our expectations.

“This accounted for 23% of our earlier FY20F net profit but generally in line with consensus,” it said.

AmInvestment said Digi.Com’s management highlighted that its guidance will be revisited due to the movement control order (MCO), Covid-19 pandemic and economic outlook.

“The stock currently trades at a fair FY20F EV/EBITDA of 12x – at parity to its 2-year average with decent dividend yields of 4%,” it said.