Digi Essay

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Company Focus Digi.Com Bloomberg: DIGI MK | Reuters: DSOM.KL Malaysia Equity Research PP 11272/04/2009(021317) 15 Sep 2008 BUY RM23.20 KLCI : 1,044.03 Price Target : 12-Month RM 30.00 Reason for Report : Company update Potential Catalyst: More dividend payout, higher earnings guidance Analyst Malaysia Research Team +603 2711 2222 general@hwangdbsvickers.com.my More excitement in 2009 Story: MNP (mobile number portability) has been implemented in Klang Valley on a very quiet note during the trial period. Nationwide implementation would take place early next month. Porting is currently capped at 100 per celco with limited branches offering porting services while advertisement is absent. We continue to view Digi as a key beneficiary of MNP given its strong marketing and brand positioning, especially in the postpaid segment. Note that although Digi lost subscriber market share vs. competitor Celcom in 2Q08, Digi gained revenue market share, which is more important than subscriber gains. Point: Going by historical practices, we expect competition to remain rational when MNP is fully implemented although competition is expected to intensify. We do not see the new player as disruptive because of its limited pricing power as we think it’s interconnect charges are high. The benefit of MNP would be more apparent next year, when Digi would have another growth driver – 3G services. Digi’s focus on higher ARPU postpaid net add is the correct strategy Relevance: We remain positive on Digi and reiterate our BUY call on the stock with a DCF-based price target of RM30.00. Coming from a low postpaid base of only 13% of its total customers (vs. 19%-20% of competitors’), we see the postpaid segment as Digi new growth driver and that the MNP offers Digi that opportunity. Digi has a greater likelihood of surprising the market on the upside in terms of earnings and
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