DiGi.Com Bhd said it will pay out 138% of its 2009 net profit as dividends after posting a full-year earnings that were in line with analysts’ expectations but which showed the effects of last year’s economic slowdown.
The full-year dividend payout, at RM1.78 per share and totalling RM1.38bil, is DiGi.Com’s largest in terms of proportion to its net profits and gives its shares a dividend yield of 8% based on yesterday’s closing price of RM21.10 per share.
DiGi used its strong cashflows and raised a little more debt to pay out its dividends. It is likely to maintain, if not increase, its dividend payments in 2010.
Johan Dennelind, chief executive officer of DiGi, explained: “It is no secret. We are gearing up to pay more dividends. We hope to reach the optimal use of our balance sheet and debt to equity level this year to maintain our yield story. We are not there yet.”
DiGi also enjoyed an increase its operational cashflows – essentially derived from its earnings before interest, tax, depreciation and amortisation (EBITDA) minus capital expenditures and which provides a good indication of cash available for dividend payments – to RM1.4bil for 2009 compared with RM1.27bil previously.
Without providing details, Dennelind added that while DiGi may increase its debt levels, it would not do so at the extent of missing out on investment opportunities in growth areas such as mobile internet.
In the fourth quarter ended Dec 31, 2009, DiGi’s interest bearing debts rose by RM50mil to RM921.7mil, while its cash position dipped by RM187.6mil to RM430mil.
UOB Kay Hian’s head of research Vincent Khoo said DiGi’s headline figures were in line with analysts expectations but pointed out that margins were easing.
He added that DiGi’s use of its cash and debt to pay dividends was not a concern. “It is merely managing its capital and optimising its gearing to distribute cash to shareholders, something that mature companies tend to do.”
For the year ended Dec 31, 2009, DiGi.Com posted an EBITDA of RM2.1bil, a drop from the previous year’s RM2.2bil.
DiGi.Com’s EBITDA margins also dropped to 43.3% compared to 45.1% in the previous year, the result of a decline in its average revenue per user to RM55 from RM59 previously. DiGi.Com attributed the slowdown to reduced spending by the low-income segments and increased competition.
On the prospects for 2010, Dennelind said DiGi was optimistic that the overall usage trend would stabilise and business would continue to grow, arising from a big pent up demand for quality broadband and internet access.
For FY2009, net profit was RM1bil versus RM1.14bil in FY2008 although revenue grew by 2% to RM4.91bil, underpinned by steady demand for mobile services from its 7.7 million subscriber base, up 8% year-on-year.
Dennelind said 2009 was a year of transition for DiGi as it ventured into the provision of mobile internet in a big way. “The focus now is to turn this into revenue momentum,” he said.
He said the future growth of the industry would be driven by a higher uptake of mobile internet services.
“The launch of DiGi Internet last year has been well received with more than 500,000 mobile Internet customers to date,” he added.
Dennelind also said that DiGi would spend about the same amount it did last year in capital expenditures.