OUTPERFORM
Target Price: RM5.20
Digi has continued to outperform with a 31.3% total return YTD vs. 28.5% that of the telco sector and the 10.0% in FBMKLCI. Despite the hefty YTD performance, the stock is still able to provide a 6.6% capital upside from here judging by its minimum annual dividend commitment and higher than historical average and FBMKLCI dividend yield. That said, the stock could have some yield compression going forward given that investors are still chasing for safe heaven and defensive shelters in the current volatile market. The company's outlook remains intact in our view with potential more strategic collaborations with Celcom in the future. We have raised our targeted FY13 EV/EBITDA to 12.9x (+3SD) from 10.8x (+2SD) previously. Hence, our Digi target price has been raised from RM4.68 to RM5.20, implying a dividend yield of 4.3% for FY13 (based on 22.1 sen DPS ex-capital management). However, the inflection point of Digi's strong share price performance could be peaked should there be 1) fewer concerns on the external risks and 2) when its historical volatility trend lines start to converge. Maintain OUTPERFORM rating.
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