Digi to return excess cash to shareholders (FV- RM22.00)

DIGi.COM Bhd may consider returning excess cash to shareholders as an option to optimise its balance sheet, its chief executive officer Johan, Dennelind said. “We are trying to optimise our balance sheet .We started that exercise a few years ago and want our balance sheet in an optimal capital structure. (Malaysian Reserve)




Comment: This is a not a new development as management has been progressively undertaking capital management activities to right size its balance sheet. We had previously highlighted that there is room for Digi to return up to RM2.00/share assuming it closes the gap with regional comparables in terms of net gearing of 0.8-1x (net debt/EBITDA 1x) from the current minimal net gearing position. Based on our dividend forecast of RM1.35/share for FY09, Digi’s dividend yield translates into 6.2%. We are maintaining our NEUTRAL recommendation with unchanged target price of RM22.00 on concerns over the potential overhang resulting from portfolio re-balancing ahead of the imminent listing of Maxis which is also being pitched as a dividend stock.