Financial Ratio Analysis, Fundamental Anlysis on Digi Telecommunication BHD

1. Company Valuation
Digi Telecommunication Bhd.
D I G I .C O M B e r h a d
w w w. d i g i . c o m . m y
Itmamul Akwan (825839)
Nurul Islamiyah (825841)

2. FR
Presentation Layout
Add a footer 2
1.
Introduction
Brief Intro About DIGI and Study
Objective
2. Main
Discussion
Valuation (Analysis Overview, Evidential
Matter , Assumption, Crucial Factors)
3.
Conclusion Inferences

3. The Objective
t o a n a l y z e a c o m p a n y a n d m a k e a
r e c o m m e n d a t i o n w h e t h e r t h i s c o m p a n y
i s a ‘g o o d b u y ’ t o i n v e s t i n

4. Digi Telecommunication
S in c e 1 9 9 5 , Pu b lic ly listed 1 9 9 7
• On 24 May 1995, the first teleco company in Malaysia to launch and
operate a fully digital cellular network
• the first to offer GPRS (2.5G) and later EDGE (2.75G) in Malaysia at 2004
• On second quarter of 2018 provides mobile connectivity to 11,659 million
Malaysian
• Headquarter is located in Subang Hi-Tech Industrial Park, Shah Alam,
Selangor
• 2019 revenue reaches RM 5.92 Billion, and RM 1.48 Billion Profit After Tax
• MYR 4.54 Current Stock Price, In Main Market.
Add a footer 4
Brief Intro

5. FR
Add a footer 5
MAIN DISCUSSION
Company
Stock
Valuation
1.
Financial
Ratio
Analysis
2.
Valuation
Analysis
3.
Technical
Analysis
4. Crucial
Factors

6. FR
1. Financial Ratio Analysis
Add a footer 6
MAIN DISCUSSION
a. Liquidity
Ratio
b. Profitability
Ratio
c. Solvency
Ratio
d. Net Profit
Margin

7. FR
a. Liquidity Ratio
Bloomberg Data 7
MAIN DISCUSSION
0.46
0.38
0.76
0.83
0.78
0.27
0.15
0.26
0.43
0.32
0.17
0.06
0.13
0.25
0.16
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
2014 2015 2016 2017 2018
DIGI.COM Liquidity
Current Ratio Quick Ratio Cash Ratio

8. FR
Bloomberg Data 8
b. Profitability Ratio
MAIN DISCUSSION
50.43 38.43
32.14 26.06 25.60
296.22
271.39
315.84
284.80
287.74
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
2014 2015 2016 2017 2018
DIGI.COM Profitability
Return on Assets Return on Equity

9. FR
Bloomberg Data 9
c. Solvency Ratio
MAIN DISCUSSION
Year 2014 2015 2016 2017 2018
Long-Term Debt/Equity 35.55 4.89 346.42 518.86 373.25
Long-Term Debt/Capital 14.07 1.40 64.22 83.51 74.62
Long-Term Debt/Total Assets 5.67 0.54 32.72 46.14 40.49
Solvency

10. FR
Bloomberg Data 10
d. Net Profit Margin
MAIN DISCUSSION
28.87
24.76 24.76
23.36 24.07
0
5
10
15
20
25
30
35
2014 2015 2016 2017 2018
DIGI.COM Net Profit Margin
Net Profit Margin Poly. (Net Profit Margin)

11. FR
Add a footer 11
2. Valuation Analysis
MAIN DISCUSSION
a. Dividend
Discounted
Model (DDM)
b. Free Cash
Flow to Equity
Model
c. P/E Ratio
d. Residual
Income
Also
a. Bollinger
Bands
b. Stochastic
Oscillator KD
c. MACD

12. FR
Add a footer 12
a. Dividend Discounted Model (DDM)
MAIN DISCUSSION
Year KLCI INDEX Market Return (10-Years)
2018 1690.58 -0.06
2017 1,796.81 0.09
2016 1,641.73 -0.03
2015 1,692.51 -0.04
2014 1,761.25 -0.06
2013 1,866.96 0.10
2012 1,688.95 0.10
2011 1,530.73 0.01
2010 1,518.91 0.18
2009 1,272.78 0.37
2008 876.75
Avg. Returned 6.57%
beta 1.01
Riskfree (the newest10yearsbond yield) 3.44%
Market Risk 6.57%
riskpremium 3.13%
Dividend Discounted Model (DDM) Value
DDM Value 9.3307
Current DIGIStock Price 4.62
Under Value
DDM Value = Expected Dividend (2019) / (Expected
Return – Average Dividend Growth)
DDM Value = 0.2087) / (6.60% – 4.36%)
year DPS Annual Change
2009 0.1000
2010 0.1600 26.49%
2011 0.1800 6.07%
2012 0.1800 0.00%
2013 0.2100 8.01%
2014 0.2600 11.27%
2015 0.2200 -8.01%
2016 0.2100 -2.30%
2017 0.1900 -4.88%
2018 0.2000 2.60%
Avg. Dividend Growth 4.36%
Expected Dividend (2019) 0.2087
DIGI Bhd

13. FR
Add a footer 13
b. Free Cash Flow to Equity Model
MAIN DISCUSSION
Components 2018
FCFE RM(million)
NetIncome 4.340088
(+) DepreciationExpense 5.20841
(-)Capital Expenditures -0.391138292
(-)Changesin WorkingCapital -1.739169417
(-)PrincipalDebt Payments
(+) NewDebt Issues
FCFE 7.418190
2018 FCFE 7.418190
2019 ExpectedFCFE (4% growth) 7.714918

14. FR
Add a footer 14
c. P/E Ratio
MAIN DISCUSSION

15. FR
Add a footer 15
d. Residual Income Analysis
MAIN DISCUSSION
Year Net Income g N.I. (1) Book Value B.V. (1) k (BV x k) 1 + k PV (in RM '000)
2018 163,000 163,000.00
2019 382,017 163,000 4.5% 7,400 1.05 358,347.81
2020 382,017 4.5% 399,361 163,000 170,400 4.5% 7,736 1.09 358,347.81
2021 399,361 4.5% 417,492 170,400 178,136 4.5% 8,087 1.14 358,347.81
2022 417,492 4.5% 436,446 178,136 186,224 4.0% 7,449 1.17 366,708.18
2023 436,446 4.0% 453,903 186,224 193,673 4.0% 7,747 1.22 366,708.18
2024 453,903 4.0% 472,060 193,673 201,420 4.0% 8,057 1.27 366,708.18
2025 472,060 4.0% 490,942 201,420 209,476 4.0% 8,379 1.32 366,708.18
2026 490,942 4.0% 510,580 209,476 217,855 3.5% 7,625 1.32 381,949.65
2027 510,580 3.5% 528,450 217,855 225,480 3.5% 7,892 1.36 381,949.65
2028 528,450 3.5% 546,946 225,480 233,372 3.5% 8,168 1.41 381,949.65
2029 546,946 3.5% 566,089 233,372 241,540 3.0% 7,246 1.38 403,719.80
2030 566,089 3.0% 583,071 241,540 248,786 3.0% 7,464 1.43 403,719.80
4,658,164.70
777,500.00
5.99
4.62
UndervalueStock Valuation
Residual Income Valuation Model
Total PV of Residual Income
Number of Shares Outstanding
Intrinsic Value
Current Price

16. FR
www.investing.com 16
Bollinger Band, Stochastic Oscillator KD, & MACD
MAIN DISCUSSION

17. FR
Bloomberg Data 17
Sustainable Growth Rate (SGR)
Sustainable Growth Rate (g=RR*ROE)
Year Retention Rate ROE g
2009 0.21 57.44 12.28
2010 -0.13 78.51 -10.36
2011 0.00 94.89 0.00
2012 0.06 139.55 7.91
2013 0.00 539.55 -2.55
2014 -0.02 296.22 -7.00
2015 0.09 271.39 24.67
2016 0.03 315.84 10.24
2017 0.04 284.80 10.22
2018 0.00 287.74 0.00
Avg. Growth Rate 4.54
MAIN DISCUSSION

18. FR
Favorab le Fac tors
Add a footer 18
Favorable and Unfavorable Factors
1) Resilient Performance Supported by Solid Postpaid and Prepaid Internet Revenue Growth
2) Solid Postpaid Growth Fuelled by Healthy Acquisitions and Plan Upgrades
3) Stronger EBITDA Underlined by Solid Postpaid Growth and Efficient Operations
4) Healthy PAT Margin at 23%
5) Healthy Shareholder’s Return and Strong Balance Sheet
6) Impact of MFRS Changes on 2018 Financials
MAIN DISCUSSION

19. FR
Unfavorab le Fac tors
Add a footer 19
MAIN DISCUSSION
1) The value of Long Term Debt to Capital is Quite High
2) High level of Ratio of Long Term Debt to Equity
3) Mainly Financing for Company is Coming from Shareholder’s Equity

20. FR
Add a footer 20
Conclusion
Valuation Intrinsic Value Curent Price Under/overvalue type
DDM 9.33 4.62 4.71 Undervalue
FCFE 7.7 4.62 3.08 Undervalue
Residual Income 5.99 4.62 1.37 Undervalue
Year 2013 2014 2015 2016 2017 2018
Industry P/E Ratio 23.22 27.63 23.85 21.39 23.05 20.48
DIGI P/E Ratio 22.65 23.64 24.32 23.00 26.84 22.73
Over/Undervalue 0.58 3.99 (0.47) (1.61) (3.79) (2.25)
Sustainbale Growth Rate 4.54
P/E Ratio

21. FR
Add a footer 21
Conclusion
1.
Financial
Ratio
Analysis
2.
Valuation
Analysis
3.
Technical
Analysis
4. Crucial
Factors
Conclusion

22. Thank You for Your Attention !
Itmamul Akwan and Nurul Islamiyah