(425190-x) invest malaysia 2019 - digi.com...
TRANSCRIPT
DIGI.COM BERHAD (425190-X)
Invest
Malaysia 2019
Mar 2019
2
Disclaimer
This presentation and the following discussion may contain forward looking statements by Digi.Com Berhad (Digi) related to financial trends for future periods. Some of the statements contained in this presentation or arising from this discussion which are not of historical facts are statements of future expectations with respect to financial conditions, results of operations and businesses, and related plans and objectives. Such forward looking statements are based on Digi’s current views and assumptions including, but not limited to, prevailing economic and market conditions and currently available information. These statements involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in the forward looking statements. Such statements are not and, should not be construed, as a representation as to future performance or achievements of Digi. In particular, such statements should not be regarded as a forecast or projection of future performance of Digi. It should be noted that the actual performance or achievements of Digi may vary significantly from such statements.
• Introduction
• Purpose & Strategy
• How We Do It?
• 2018 Performance
• Other Updates
• 2019 Outlook
4
• Largest mobile operator in Malaysia
with over 11.7 million customers
• Empowering customers with affordable
and quality internet services and the benefits of digital connectivity • Robust 4G Plus network coverage
nationwide (4G-LTE: 89%; LTE-A: 65%)
• Alongside delivering sustainable growth and profitable operations • RM6.5 billion revenue @ 46.5% EBITDA
margin in 2018 4
Introduction
5
Telenor 49%
EPF 16%
PNB 12%
KWAP 3%
Tabung Haji 2%
Foreign funds 10% Others
8%
Malaysia’s largest pension funds and fund management company
#11 MOST VALUABLE STOCK ON FBM KLCI
SHARE PRICE: RM4.51 (As of Mar 12, 2019)
7,775,000,000 UNITS OF ISSUED SHARES
RM35.2 BILLION MARKET CAPITALISATION
STRONG AND DIVERSE SHAREHOLDERS MIX with steady support from both local and foreign investors
Introduction
HIGHLY COMPETENT AND EFFECTIVE TEAMS with strong integrity and corporate governance
Vimala Menon Torstein Pedersen Yasmin Aladad
Tone Ripel Anne Karin Kvam TS Saw Choo Boon
Haakon Kjoel (Chair)
Kesavan (CTO) Elisabeth (CHRO) Praveen (CDO)
Joachim (CCAO) Loh Keh Jiat (CMO) Eugene Teh (CBO)
Inger Folkeson (CFO)
Albern Murty (CEO)
BOARD OF DIRECTORS MANAGEMENT
Introduction
Purpose & Strategy
8
(EQUIP) Mindset & capabilities
building
(ENABLE)
Innovation Platforms
(INSPIRE)
Storytelling
40 learning hours/ employee Digi Apprentice Program
EMF/ SLF Sharing Digital Day
Red Explorer Teams
Maker Community
Everyday Innovation Bootcamps
Agile Marketing in iTelco
Digi – X
What’s Your Next? Townhall Sharing
BUILDING A CULTURE OF INNOVATION 360 across the entire organisation to unlock new opportunities and business resilience
Extended Management Forum & Senior Leadership Forum
How We Do It?
FOCUS ON DIGITISATION OF CORE to enable seamless digital customer experience, B2C capabilities and efficiencies
Digital Distributions via
Strategic Partnerships Digital In-Store Experience
(Mobile Sales App, paperless)
Digital Engagements via MyDigi (Personalised offers & rewards)
Promote
Engage
Sell/Serve
Deliver
Care
How We Do It?
10
STRONGER Indoor Signal
WIDER Outdoor Coverage
BETTER Network Capacity
Introduction
Spectrum portfolio Bandwidth (Mhz) Expiry Year Network
900Mhz 2x5 2032 4G
1800Mhz 2x20 2032 2G/ 4G
2100Mhz 2x15, 1x5 2034 3G / 4G
2600Mhz 2x10 2019 4G
EFFICIENT USE OF DIVERSE SPECTRUM PORTFOLIO to support our customers’ growing digital demand
How We Do It?
GROWTH
EFFICIENCY
DIGITAL TRANSFORMATION
+19.9% Internet Revenue
(+503K Internet Subscribers)
+2.4% EBITDA
RM685mil Capex
LTE-A: 65% 4G LTE: 89%
+14.8% Postpaid Revenue
Flat Opex (RM1,956mil)
Digital distribution
Android
#1 NPS (higher satisfaction
year-on-year)
3.0 Million MyDigi MAU (85.9mil upsell transactions)
Flat service revenue
46% EBITDA margin
11.6% Capex to service revenue
+4.3% uplift in dividend per share to 19.6sen
All analysis and comparisons are made based on old accounting principles. A summary of the financial impact post adoption of MFRS 15 will be included as part of Other Updates
SOLID PERFORMANCE IN 2018 supported by sustainable growth, efficient operations and digital innovations
2018 Performance
12
Core business MyDigi
Digi Connectivity
• Continued postpaid conversions with entry level plans
• Strengthened high ARPU base with plans upgrades, Family and borderless roaming proposition
• Increased in contracted base with the launch of easy device ownership program - Phone Freedom 365 (PF365)
• Enabled Digi Wifi access across 277 locations
• Pilot Digi Home Fibre in Jasin
• 3.0M monthly active users, +20% Y-Y
• Personalize “Box of Surprise” contributed 10% of the total upsell transactions within MyDigi
• 10.7x monthly logons
Digital distribution
• Enabled mobile data management feature on Android devices
• Ease purchase of relevant offers directly within the Android user interface
TRACKING WELL ON STRATEGIC FOCUS AREAS and digital propositions
2018 Performance
13
Introduction
INTERNET REVENUE (RM M) DATA TRAFFIC GROWTH
+13.7% Y-Y +3.9% Q-Q
+58% Y-Y +11% Q-Q
MONTHLY DATA USAGE (GB/user)
4G & INTERNET SUBSCRIBERS (M)
6.2 6.6 7.1 7.5 7.9 8.7 8.6 8.8 9.0 9.2
4Q17 1Q18 2Q18 3Q18 4Q18
4G Internet
6.8 7.2 8.2 9.1 9.9
4Q17 1Q18 2Q18 3Q18 4Q18
398 393 405 399 409
349 368 400 418 440
747 761 805 817
849
4Q17 1Q18 2Q18 3Q18 4Q18
Prepaid Postpaid
4G PLUS NETWORK COVERAGE
• 4G LTE: 89%
• LTE-A: 65%
• FIBRE: 8,400KM
+26% Y-Y +3% Y-Y
Nationwide LTE upgrade on
ROBUST INTERNET GROWTH anchored on better network experience and growing internet adoption
2018 Performance
14
11.4 12.1 12.3 11.7 11.7
2014 2015 2016 2017 2018
6.33 6.35 6.23 5.91 5.92
Subscribers (‘000)
Service revenue (RM billion)
47 45 42 41 41 ARPU (RM)
• Steady subscribers and ARPU with increased internet base from 8.7 million to 9.2 million o Smartphone users surged to 79.6% o Internet revenue strengthened +19.9%
• Record postpaid revenue growth at 14.8%
• Strong demand from pre-to-post conversions and high value plans through PF365 and Family propositions
• +325K net adds to 2.8 million postpaid subscribers at RM76 ARPU
• 12.2% prepaid internet revenue growth
o +253K prepaid internet subscribers to 6.7 million
o Narrowed prepaid revenue decline to 8.5%
• +0.2% service revenue to RM5.92 billion
2018 Review
SERVICE REVENUE
RESILIENT SERVICE REVENUE with increased internet contribution and higher postpaid base
2018 Performance
15
2.10 2.03 1.64 1.52 1.54
1.77 1.89 2.01 1.96 1.96
3.87 3.92 3.65
3.47 3.50
2014 2015 2016 2017 2018
3.16 2.98 2.96 2.89 2.96
Opex
EBITDA (RM billion)
45% 43% 45% 46% 46% EBITDA Margin
COGS
Total Cost (RM billion)
• Cost of goods sold (COGS) rose 1.9% to RM1.54 billion due to higher device cost arising from the surge in demand for contracted device bundles and the new PF365 program.
• Gross profit improved 1.4% to RM4.89 billion
• Opex remained flat at RM1.96 billion, amid solid growth from postpaid and robust 4G Plus network expansion and capacity upgrades
• Efficiencies achieved across sales and marketing activities, network operations along with development of new digital capabilities
• EBITDA rose 2.4% to RM2.96 billion or 46% margin
anchored on stronger internet revenue contribution and efficient cost management
2018 Review
TOTAL COST & EBITDA
STRONGER PROFITABILITY from solid cost discipline and improved operational efficiencies
2018 Performance
16
0.90 0.90 0.78 0.75 0.69
2014 2015 2016 2017 2018
2.26 2.08 2.18 2.14 2.27 Ops Cashflow (RM billion)
32% 30% 33% 34% 35% Ops Cashflow Margin
Capex (RM billion)
• Invested RM685 million Capex or 11.6% of service revenue as planned on
• Digi 4G Plus network expansion, capacity upgrades and quality optimisation
• Digitisation of core business with strategic digital capabilities
• Robust 4G-LTE and LTE-A coverage and fibre
network to support significant surge in data demand
• Ops cashflow strengthened to RM2.27 billion or 35% margin, supported by robust EBITDA growth and efficient capex
2018 Review
OPS CASH FLOW & CAPEX
CONTINUED INVESTMENT INTO GROWTH OPPORTUNITIES along stronger ops cash flow
2018 Performance
17
26.1 22.2 21.0 19.0 19.8
2014 2015 2016 2017 2018
26.0 22.0 20.9 18.8 19.6 DPS (sen)
EPS (sen)
• Post adoption of MFRS 15 and 9, earnings per share (EPS) strengthened to 19.8 sen per share
• Interim dividend of 19.6 sen per share equivalent to RM1.52 billion or almost 100% payout for 2018.
• Balance sheet remained robust
• Total assets strengthened 6.5% to RM6.21 billion, underpinned by stronger spectrum portfolio and infrastructure assets, recognition of MFRS 15 contract assets and higher receivables from PF365 program.
• Net debt to EBITDA ratio stayed healthy at 0.8 times with conventional debt over total asset ratio at 21%, well within the Shariah compliance threshold of 33%
2018 Review
EPS AND DPS (sen)
HEALTHY SHAREHOLDERS RETURNS with dividend payouts increased to RM1.52 billion
2018 Performance
18
Other Updates
With effect from 1 January 2018, Digi adopted MFRS 15 Revenue From Contract With Customers and MFRS 9 Financial Instruments using a modified retrospective approach. In 2018, the accounting of MFRS 15 and MFRS 9 provided an uplift of RM77 million to the EBITDA: • Reduction in service revenue – RM134
million • Increase in device revenue – RM225
million • Increase in opex – RM14 million
IMPACT OF MFRS CHANGES on 2018 performance
RM million 2018
(Pre MFRS) 2018
(Post MFRS) Delta %
Service revenue 5,924 5,790 (134) -2.3%
Total revenue 6,436 6,527 91 1.4%
Opex 1,956 1,970 14 0.7%
EBITDA 2,956 3,033 77 2.6%
EBITDA margin 45.9% 46.5% 0.5
Profit before tax 2,002 2,079 77 3.8%
Profit after tax 1,483 1,541 58 3.9%
Capex 685 685 - 0.0%
Ops cash flow 2,271 2,348 77 3.4%
Ops cash flow margin 35.3% 36.0% 0.7 0.7
EPS (sen) 19.8
DPS (sen) 19.6
Other Updates
19
Other Updates
CHANGES TO MOBILE TERMINATION RATES (MTR)
Sen 2017 2018 2019 2020
Local 3.65 2.92 1.96 0.99
National 3.88 2.92 1.96 0.99
Sub-marine
15.73 2.92 1.96 0.99
• Effective 1 Jan 2019
• Comparisons for 2018 will not be restated and all communication relating to the development will be based on old accounting principles
• Financial statements for 2019 will be based on both old and new accounting principles
• On 20 Dec 2017, MCMC issued Determination 1, 2017 of Mandatory Standard on Access Pricing
• 2019 MTR effective from 1 Jan 2019 onwards
• 33% YoY reduction in termination rates in 2019
MFRS 16: LEASES
…. applies a “right-of-use” approach which requires a lessee to recognise assets and liabilities for the rights and obligations created by lease contracts. Assets and liabilities arising from a lease are initially measured on a present value basis …recognises depreciation of the right-of-use asset and interest on the lease liability
MFRS 16 ADOPTION AND MTR REVISION application from 1 Jan 2019 onwards
Other Updates
20
Other Updates
21
TalentCorp Life at Work Awards 2017
TOP 50 COMPANY
2018 Thomson Reuters Diversity & Inclusion Index
Digi as a brand
Commitment to responsible and
resilient digital citizenry and
empower internet access to
reduce inequality
RESPONSIBLE
BUSINESS CONDUCT
EMPLOYER OF CHOICE
Other Updates
22
GROWTH
Deploy network for best internet experience
Continue to drive Postpaid growth and SME/B2B opportunities
Capture growth from existing customers
EFFICIENCY Continue focus and execution of OE initiatives
Build ‘Customer Obsessed’ and ‘Innovation 360’ culture, cultivate growth and efficiency mindset
WINNING TEAM
SHARPER FOCUS IN 2019 TO DELIVER growth, efficiency and winning team alongside digital transformation agenda
2019 Priorities
23
Delivered 2018 guidance
Post MFRS 15, service revenue and EBITDA will be impacted by amortisation of b/f contract assets and new contract assets
AIM AT DELIVERING SUSTAINABLE GROWTH IN 2019 anchored on resilient revenue and stronger EBITDA
2019 Outlook
PRE MFRS 15 & 9 POST MFRS 15 & 9
FY 2018
2019 Guidance
FY 2018 2019
Guidance
Service revenue RM5,924m Around 2018
level RM5,790m
Around 2018
level
EBITDA RM2,956m Low single
digit growth RM3,033m
Low single digit growth
Capex to service revenue ratio
11.60% 11% - 12% 11.80% 11% - 12%
1 Guidance above excludes impact of MFRS 16: Leases
2019 2018
PRE MFRS 15 & 9
2018 Guidance
FY 2018 Actual
Service revenue Flat +0.2% to
RM5,924m
EBITDA 46% - 47% 46%
Capex to service revenue ratio
11% - 12% 11.6%
24
Q&A?
