Monday, February 23, 2009

Malaysia - roaming fraud

Digi suffered roaming fraud worth RM15m

Digi suffered roaming fraud that caused an RM15 million impact on EBITDA in the fourth quarter of last year. Excluding the fraud, EBITDA margins would have expanded quarter-on-quarter by 45 per cent in the Q408. The losses accumulated from roaming fraud was however mitigated by cost optimisation initiatives, a pullback in staff bonuses and lower advertising and promotion expenditure.

OSK Research said this after its analyst had a conference call with Digi management. “The fraud creates a loophole where users can roam for free,” says the analyst. “Therefore Digi sees it as a cost item. But they are trying to address it.”

Digi also says that the syndicate perpetrating the fraud also affects other telcos.

OSK has downgraded Digi to neutral from buy as earnings are expected to decline 7-8 per cent in the next two years as margin pressure from starting up its 3G business starts to build up and it also faces the possibility of a tariff skirmish with other telcos.

The target price for Digi shares has been lowered to RM21.30 from RM24.10.

“Digi closed FY08 on a decent note, turning in a respectable set of figures despite challenging economic conditions in the second half of last year with the advent of number portability and price competition,” said OSK in a research note. “While we note that Digi should still deliver on dividends going forward, its earnings appear to be slowing faster than expected.”

FY08 core net profit was RM1.14 billion which represents a 7.3 per cent growth year-on-year. The final dividend of 53 sen per share put the full year dividend at RM1.88 per share which represents a nine per cent yield.

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