Digi commands higher yield than Maxis

Digi has the highest yield in the sector, which could be of interest to dividend seekers. Its ROE also stands tall at above 200%, says analyst


DIGI.COM Bhd is expected to pay a higher dividend compared to Maxis Bhd moving forward, as the latter recorded significant increase in credit risk due to the Covid-19 pandemic.

An industry analyst said both telecommunication companies (telcos) focused in the Malaysian market currently have a “neutral” viewpoint.

“Maxis’ dividend used to be so good but now they lowered it. I think the lower dividend will remain for a long while, so it’s status quo for Maxis in terms of dividend.

“Currently, Digi pays the highest dividend among the telco players,” the analyst said.

Digi is the leader for the prepaid segment, while Maxis commands the highest average revenue per user in the postpaid segment.

Kenanga Investment Bank Bhd (Kenanga Research) analyst Clement Chua said telcos will continue to be perceived to possess long-term sustainability and as a supplement to economic recovery in the medium term.

“We believe these hiccups will be contained within this financial year, unless the pandemic worsens.

“Digi commands the highest yield in the sector, which could be of interest to dividend seekers. Its return on equity (ROE) also stands tall at above 200%,” he said in a recent note.

Kenanga Research has “Market Perform” recommendations for Digi and Maxis, with a target price of RM4.65 and RM4.90 respectively.

AmInvestment Bank Bhd analyst Alex Goh said the firm retains its forecasts for Digi pending further clarity on the reaction of other cellular operators over the next few months.

“We view Digi’s new marketing strategy as management’s desperate efforts to retain its leading position in the prepaid segment, which accounts for a market share of 39% among the top three operators.

“The stock currently trades at a fair FY21F enterprise value per earnings before interest, tax, depreciation and amortisation (EV/ Ebitda) of 11 times — slightly below its two-year average of 12 times with a decent dividend yield of 4%,” he noted in a recent report.

On Maxis, Goh said, its dividend payout — which was 104% in 2019 — is being reviewed together with its operational and capital expenditures, focusing more on core network operations and growth projects with more immediate returns.

“We maintain Maxis’ forecasts pending improved clarity from its second quarter of 2020 results next month.

“The stock’s FY21F EV/Ebitda of 13 times is currently on parity with its three-year average, while providing a fair dividend yield of 4%,” he noted.

AmInvestment Bank retains its ‘Hold’ ratings on Digi and Maxis with an unchanged fair value of RM4.55 and RM5.50 per share respectively.

Digi closed at RM4.34 last Friday while Maxis at RM5.32.