Sensitivity: Internal PRESENTATION BY MANAGEMENT 1 Digi At A - - PowerPoint PPT Presentation
Sensitivity: Internal PRESENTATION BY MANAGEMENT 1 Digi At A Glance Our Purpose and Strategy 2 3 2019 in Review 4 1Q2020 Key Highlights 5 Covid-19 and Business Continuity Plan (BCP) 6 2020 Outlook and Priorities 2 Sensitivity:
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PRESENTATION BY MANAGEMENT
Digi At A Glance Our Purpose and Strategy 2019 in Review 1Q2020 Key Highlights 1 2 3 4 Covid-19 and Business Continuity Plan (BCP) 5 2020 Outlook and Priorities 6
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Digi At A Glance
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DIVIDEND PAYOUT RATIO FY2019
RM6.5bn
TOTAL REVENUE FY2019
CUSTOMERS FY2019
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PURPOSE – Connecting YOU To What Matters Most
OUR BEHAVIOR
Always Explore Create Together Keep Promises Be Respectful
OUR WAY OF WORK
Customer Obsession Innovation 360
OUR STRATEGY
Purpose & Strategy
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FOCUSED STRATEGIC PRIORITIES
GROWTH EFFICIENCY & SIMPLIFICATION WINNING TEAM RESPONSIBLE BUSINESS
from consumer and B2B business
from existing customer base
competitive network
transformation
structural
efficiency initiatives to ensure profitable business
inclusivity at workplace
capabilities and build critical digital competencies
sustainable business conduct, adhering to high governance standards
economic, environmental, and social priorities
Purpose & Strategy
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DIGI’S EVOLUTION
2014-2016 2017-2018 2019-2020
Digital Solutions/Services
CUSTOMERS’ FAVOURITE PARTNER IN DIGITAL LIFE Digital Service Provider
Core Offerings
CONNECTING YOU TO WHAT MATTERS MOST Digital Connectivity Provider
Core Offerings Digital Solutions/Services
INTERNET FOR ALL Internet Service Provider
Core Offerings Digital Solutions/Services Purpose & Strategy
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ADAPTING & MANAGING CHANGING ENVIRONMENT
9.4 million internet customers 85% smartphone penetration rate 13.8GB average monthly data usage +48% total data traffic growth
Increasingly digital customers Expect secure and reliable network IoT, AI, 5G and more
76.7 million upsell transactions
✓ Strengthen network nationwide ✓ Improve network resilience ✓ Protect data, privacy and security ✓ Modernise network & IT systems ✓ Collaborate with industry players ✓ Increase 5G preparedness ✓ Capitalise on internet adoption ✓ Enhance personalised offerings ✓ Provide physical & digital connection
Actively optimised and re-farmed spectrum to improve network performance and capacity Partnership with TM on submarine cable system access to drive high-quality internet connectivity Improved privacy controls and educate vendors on privacy ethics Smart partnerships in different industry verticals to pilot 5G technology Joint collaboration with Maxis and Celcom to explore fibre infrastructure development Robotic Process Automation for network analysis to improve quality more efficiently
Purpose & Strategy
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50 60 70 80 90 100 110 120 Indexed to 100
Share Price Performance against Bursa Malaysia's KLCI since 2 Jan 2020 Digi KLCI 2 Jan’19 KLCI 1,588.76 points DIGI RM4.46
4.1%
Dividend Yield
12.27x
EV/EBITDA Ratio
24.69x
P/E Ratio
8.5 sen
Net assets per share
#9 Most Valuable Stock On FBM KLCI
28 May’20 KLCI 1,457.50 points DIGI RM4.48
RM34.8 billion Market Capitalisation
YTD % +0.5%
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RESILIENT SHARE PRICE PERFORMANCE VS FBM KLCI
2019 in Review
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GROWTH EFFICIENCY DIGITAL TRANSFORMATION
↑11.0%
Internet and digital revenue
↑11.9%
Postpaid revenue¹ with over 3.0 million subscribers
↑6.0%
B2B revenue
Digi Home Fibre
↓ 0.2% Opex
46%
EBITDA Margin
RM753 million
Capex or 13.3% to service revenue
24%
Industry leading PAT Margin
3.8 million
↑24% increase in monthly active MyDigi users
IT Common Delivery Centre
Operating model innovation
Office 365
Digital Workplace
5G
OpenLab & pilots
¹ Excludes contract assets amortisation
SOLID DELIVERY ON KEY FOCUS AREAS
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2019 in Review
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GUIDANCES MET DRIVEN BY FOCUSED STRATEGY
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A C T UA L P E R F O R M A N C E W I T H I N G U I DA N C E S
1 2 3
Service Revenue: Low single digit decline
✓ -2.5% l -1.4%1
EBITDA: Low – medium single digit decline
✓ -3.8% l -1.6%1
Capex-to-Service Revenue: 12% - 13%
✓ 13.3%
1 Excluding contract asset amortisation
M O R E S U S TA I N A B L E R E V E N U E M I X A N D G R OW T H ❑ Stronger Postpaid, Internet & Digital: 69% → 77% ❑ Reduced Reliance on Non-Internet Prepaid: 31% → 23% E F F I C I E N T A N D P R O F I TA B L E O P E R AT I O N S ❑ Healthy and industry-leading EBITDA Margin of 46% ❑ Accelerate structural cost saving opportunities while prioritising cost spend at areas that drive highest profitability
2019 in Review
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Service Revenue PAT and Margin Shareholder Return
45 42 41 41 40 12.1 12.3 11.7 11.7 11.3 3.09 3.31 3.63 4.12 4.46 3.26 2.92 2.29 1.80 1.38 6.35 5.79 2015 2016 2018 2017
2019 6.23 5.91 5.65
Postpaid, Prepaid internet & digital (RM billion) Prepaid non-internet (RM billion) Contract assets amortisation Subscribers ARPU (RM)
25 25 23 24 24 1.72 1.63 1.48 1.54 1.50 2015 2016 2017 2019 2018
PAT (RM billion)
PAT Margin (%) 99 100 99 99 99 22.0 20.9 18.8 19.6 18.2 18.4 22.1 21.0 19.0 19.8 19.2 2017 2015 2016 2018 2019
EPS pre MFRS-16 (sen) EPS post MFRS-16 (sen) Payout Ratio (%) DPS (sen)
2019 in Review
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IMPROVED REVENUE MIX AND SUSTAINABLE RETURNS
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Robust Balance Sheet Composition Of Borrowings Sukuk Programmes & Rating
BACKED BY SOLID FINANCIAL STRENGTH
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allocation of resources and asset management, pursuant to MFRS 16 adoption
priorities for future growth 22% 78%
Current Asset Non-Current Assets
threshold to qualify as a Shariah- compliant stock
1.6 times
structure and financial facilities
established position in the industry, excellent profitability and robust cashflow Total Assets RM8.15 billion 45% 15% 40%
Islamic Conventional Finance Leases
Total Borrowings RM5.15 billion Sukuk Programmes formed in 2017 ❑ IMTN Programme of up to RM5.0 billion ❑ Islamic Commercial Papers Programme with sub-limit of up to RM1.0 billion Credit Rating of AAA/Stable/P1 reaffirmed in Jan’2020 by RAM Rating
2019 in Review
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Our Network Footprint
3G: 93% 4G: 91% LTE-A: 72%
Population Coverage
300+
4G Cities & Towns
+3pp
Y-Y Network Net Promoter Score
9,610 KM
Fibre Network
PRIORITISING ROBUST 4G PLUS NETWORK COVERAGE
as at FY2019
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2019 in Review
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EXPLORING 5G POSSIBILITIES WITH PARTNERS
We play a vital role in supporting the needs of Malaysia’s digital future in tandem of National Fiberisation and Connectivity Plan (NFCP) which aims to provide high-quality and affordable digital connectivity Some of the 5G pilots at 5G Demonstration Projects at Langkawi, Kedah in Oct 19 Partnered Cyberview Sdn Bhd and ZTE to launch the first 5G OpenLab in Cyberjaya
Malaysia’s 1st Real-Time Virtual Tourism Malaysia’s 1st Real-Time Medical Data
2019 in Review
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Golden Globe Tigers 2019 - Malaysia’s Best Employer Brand Award
consistent, healthy shareholder return
The Edge BRC 2019 - Highest return on equity over 3 years
For shareholders and investors
MSWG 2019 – ASEAN Excellence Award Long term value creation
Corporate Governance
Southeast Asia 2019 – Best Islamic Finance Deal
issued in Sep’2019
For broader society
Finance Asia 2020 – Malaysia’s #1 Best Managed Company and #1 Most Committed to Social Causes TOP 20 FINALISTS by PwC Malaysia’s Building Trust Awards 2019 Company of the year 2019 for Digital Service Provider by CSR Malaysia
For employees
The Loyalty & Engagement Awards 2019 – Best Use of Mobile (Silver) & Best Use of Influencer (Bronze) Malaysia Green Building Council - Top 10 Green Buildings Of The Decade Awards 2019
For customers For environment
DELIVERING VALUE ACROSS VARIOUS STAKEHOLDERS
minimise environmental impact and advocate safe internet usage and digital inclusion
protect customer data and deliver safe services
drive superior Internet and Digital experience
2019 in Review
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BUILDING LOYALTY & TRUST AS A BRAND THAT CARES
Supply Chain Sustainability Data Protection Ethics & Compliance Digital Inclusion & Resilience Cyber Security
2019 in Review
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A WELL-POSITIONED START FOR 2020
✓ Monthly data usage per user: 14.5GB, +42% YoY ✓ Internet & Digital Revenue: RM977 million, +13.3% YoY ✓ Service Revenue (excl. IC): RM1,366 million, +0.7% YoY ✓ MyDigi: 4.0m MAUs, +25.4% YoY ✓ Flat YoY Opex, RM411 million ✓ EBITDA margin: 48.5%
GROWT H RESPONSI B LE B USI NESS EF F I CI ENCY & SI MPL I F I CAT I ON
✓ Revised and updated Data, Privacy and Security policies ✓ Future Skills For All programme by Yellow Heart, in collaboration with MDEC and UNICEF
WI NNI NG T EAM
✓ Office 365 trainings across all functions ✓ Introduction of new Cyber Security and Privacy courses for employees
1Q2020 Highlights
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COVID 19 - MOVEMENT CONTROL ORDER (MCO)
Effective 18 March till 3 May 2020 (CMCO: 4 May - 9 June 2020)
Covid-19 and BCP
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DELIVERING PROMISE ON SERVICE RELIABILITY
Prioritise traffic and optimisation to manage rise in traffic Prioritise quality of service for critical services at specific time periods Collaborate with app providers to reduce resource intensity for services 1 2 3
NETWORK
Prioritise tuning and optimisation
War room to monitor health of customer- facing and back-end systems Collaborate with business to mitigate and explore options to reduce outages 1 2 3
IT
Covid-19 and BCP
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KEEPING CONSUMERS AND BUSINESSES CONNECTED
Resume full operations on ground with new SOPs
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Reposition our market facing offerings based on revised macro outlook Accelerate base management activities Continue to expand digital / self-serve channel footprint Enhance omni-channel capabilities (on and offline) at physical touch points Provide affordable and worry-free commitment options for SME/B2B customers
Covid-19 and BCP
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OUTLOOK – WELL POSITIONED TO MANAGE GROWTH
Source: BNM’s 2019 Economic Monetary Review
significantly on evolving Covid-19 pandemic situation and public health policies.
since 3Q2009. Rising uncertainties weighed by unprecedented measures taken to contain COVID-19 2020 guidance currently on hold pending more clarity on economic recovery whilst focusing on near-term priorities Continue creating value for our stakeholders; remain committed to our long-term strategy, prospects and continued focus on innovation
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Protecting cash flow through cost measures and financial flexibility, with a practical view on earnings parameters Investing in strengthening network and IT infrastructure to support growing data demand Deliver on core and digital business through focused customer offerings
2020 Outlook & Priorities
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Investor_Relations@digi.com.my l www.digi.com.my
This report was produced over the course of the Movement Control Order, with full adherence to safety measures and our business continuity plan guidelines.
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RESOLUTIONS OF AGM
AGENDA 2
a) To re-elect Mr Haakon Bruaset Kjoel as Director who is to retire pursuant to Article 98(A) of the Company’s Articles of Association (Resolution 1) b) To re-elect Ms Vimala A/P V.R. Menon as Director who is to retire pursuant to Article 98(A) of the Company’s Articles of Association (Resolution 2)
AGENDA 3
To re-elect Mr Lars Erik Tellmann as a Director who is to retire pursuant to Article 98(E) of the Company’s Articles of Association (Resolution 3)
AGENDA 4
To approve the payment of Directors’ fees and benefits payable to the Independent Directors (Resolution 4)
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AGENDA 5
To re-appoint Messrs. Ernst & Young PLT as Auditors of the Company and to authorise the Directors to fix their remuneration (Resolution 5)
AGENDA 6
Proposed Retention of Tan Sri Saw Choo Boon as a Senior Independent Non-Executive Director (Ordinary Resolution)
AGENDA 7
Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue
RESOLUTIONS OF AGM (CONT’D)
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Connecting You To What Matters Most
This is Digi.Com Berhad's inaugural Integrated Annual Report (IAR) 2019, prepared in accordance with the principles prescribed by the International Integrated Reporting Council (IIRC). Embarking on the integrated reporting (IR) journey is an important step for us, in terms of setting our approach towards value creation and management. Our Reporting Suite comprises the Integrated Annual Report 2019, the supplementary Sustainability Data Book 2019 and Corporate Governance Report 2019.
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DIGI’S INAUGURAL INTEGRATED ANNUAL REPORT 2019
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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.
DISCLAIMER
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23rd ANNUAL GENERAL MEETING
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RESPONSES TO QUESTIONS RAISED BY MSWG
The outlook for 2020 includes, among others, the following:
the growing focus on the digital economy and adoption of future technologies.
new normal during the Covid-19 global pandemic, leading to a change in consumer behaviour
Malaysian Communications and Multimedia Commission (MCMC) during this unprecedented Covid-19 crisis.
(Page 16 of Integrated Report - IR)
Please brief on how the Group would strategise specifically to address the outlook in 2020.
to remain a leader in enabling reliable connectivity for all Malaysians.
growth through relevant value-for- money customer
that meet the continuous demand for connectivity and digital services.
from the way we run
network, engage customers across digital and physical touchpoints and instill a culture of innovation and agility.
treat customer data, environmental impact and advocate safe internet usage and digital inclusion.
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RESPONSES TO QUESTIONS RAISED BY MSWG
The emerging opportunities are to: (i) Deploy and monetise 5G (ii) Develop digital solutions for corporates, small and medium enterprises (SMEs) and mass consumers (iii) Introduce fiber-to-the-Home (FTTH) solution
(Page 18 of IR)
a) What is the progress of 5G development and when is it expected to be launched? b) How successful has the Group been in securing
especially on revenue contribution to the Group?
a) Good progress towards readiness for 5G
virtualization and advanced security
OpenLab, 5G Demonstration Projects and Showcases to trial new use cases, and
commercial 5G plans. We will continue to build on this, towards 5G commercial pilots and launch in line with future guidance from MCMC
b) Although still early days on revenue contribution, we see solid progress in enabling a wider base of SMEs, corporates and mass consumers on their digitalization journey through:
internet access and branch-to-branch connectivity,
services for consumers
3.0, RepublicGG, EasyAdd and JomStudi
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RESPONSES TO QUESTIONS RAISED BY MSWG
Blended ARPU remained relatively resilient at RM40, comprised of stronger internet revenue mix. Postpaid and prepaid internet subscribers increased 222,000 to 9.7 million, representing 85.9% (2018: 81.2%) of the 11.3 million subscribers. a) What is the current percentage mix between postpaid and prepaid internet subscribers, the preferred
mix and preferred realistic blended ARPU? a) What measures are being taken to achieve the preferred
mix and what are the achievements to-date?
a) Postpaid and prepaid internet represent 26.9% and 59.0%
mix and preferred ARPU, we believe that our strategy to focus on sustainable postpaid and prepaid internet base fueled by relevant and personalized bundled offer will pave the way for revenue growth and stronger ARPU in the mid to longer term. b) Disciplined focus on driving postpaid growth and quality prepaid acquisitions with strong internet adoption underpinned by:
transformation initiatives to modernize channel readiness to support our internet growth ambition, combined with affordable, worry-free internet plans
These measures effectively improved revenue mix quality and set a solid foundation for service revenue resilience and growth opportunity.
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RESPONSES TO QUESTIONS RAISED BY MSWG
The consistent focus in driving growth and efficiencies enabled the Company to sustain the industry-leading EBITDA margin at 46%, despite challenging market conditions and topline pressure. (Page 32 of IR) What is the average industry EBITDA margin? What are the specific measures taken to improve the EBITDA margin?
EBITDA margin stood at 53% in FY19, ahead of industry margin which range between 39% to 41%.
profitable growth in our product offerings, driving efficiency and simplification in our business processes via digitization and operating model innovation as well as structural efficiency initiatives to generate long term value creation.
continues to reprioritize spend via scope reviews and renegotiation of contract and optimize non-essential spend to preserve EBITDA and cashflow.
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RESPONSES TO QUESTIONS RAISED BY MSWG
In the midst of the global Covid-19 pandemic, we are all navigating new ways of educating our children, running businesses, maintaining critical societal functions, while trying to ensure the health and welfare of those around us. (Page 34 of IR) Given the Covid-19 pandemic, to what extent has it impacted business and how are you preparing yourself to face the new business landscape?
financial performance, we did see slower revenue development due to Covid-19 related impact on travel and closure of stores and dealer touchpoints. We will have a clearer view of this when we announce our Q2 2020 results.
economic activities resume, we are taking a practical view of our business and protecting cash flow through cost measures and financial flexibility, with a practical view on earnings parameters for the remainder of 2020.
strategy in the last few years has prepared us and will help us manage through the new, emerging business landscape.
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RESPONSES TO QUESTIONS RAISED BY MSWG
There will be further revision to the mobile termination rates effective 1 January 2020 as prescribed in MCMC’s Determination 1, 2017 of Mandatory Standard on Access Pricing made on 20 December 2017 as follows: Please explain how, and to what extent, this will impact the Group’s business.
1 January 2020 will result in overall lower interconnect revenue and cost for Digi and across the industry.
Year (YoY) trimmed -1.1 percentage points to -0.4% YoY due to Interconnect Revenue decline of RM15 million YoY and RM16 million Quarter-on-Quarter (QoQ).
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RESPONSES TO QUESTIONS RAISED BY MSWG
The Company has actively re-farmed the diverse spectrum portfolio to deliver a stronger, more consistent 4G network experience for customers, supported by an expanded fiber network footprint of 9,610KM. In October 2019, the Company announced a partnership with TM Global to enable Digi customers to enjoy affordable internet access across 7,000 WiFi hotspots nationwide. (Page 39 of IR) What are the respective targeted expanded fiber network footprint and number of WiFi hotspots and timelines?
9,800 KM by end 2020 with 81% of our total sites fiberized or with 1 hop to fiber.
existing fiber footprints
with Maxis and Celcom in March 2020 to explore joint fiber infrastructure development to efficiently deploy fiber backhaul and rollout fiber to base stations in Malaysia.
forward to deliver affordable, widespread connectivity to all Malaysians; with some of our current sharing initiatives now ongoing for close to a decade.
connectivity nationwide, in line with the government’s NFCP ambitions.
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RESPONSES TO QUESTIONS RAISED BY MSWG
Allowance for expected credit losses (AECL) on trade receivables and contract assets has increased significantly from RM48.020 million in FY2018 to RM77.660 million in FY2019. (Page 124 of IR) What are the reasons for the significant increase? How much is attributed to contract assets and what is it’s nature? What is the probability of recovery and measures taken to recover the trade receivables and contract assets?
(“AECL”) on trade receivables is in line with the strong postpaid revenue growth of 9.8% YoY, with higher allowance attributed to increased entry-level device bundle acquisitions and Phone Freedom 365 (“PF 365”) device instalment payment programme. At end of 2019, Digi’s AECL ratio stood at 2.7%, relatively lower than industry average of 3.4%.
RM3.7 million, a year ago due to a shift in postpaid acquisition focus from upfront device bundle contracts to device financing with instalment payment over a 24- months contract period.
prevailing economic conditions, we have in place solid measures to support effective collections and recovery activities while exploring new initiatives to maximise receivables recovery.
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RESPONSES TO QUESTIONS RAISED BY MSWG
Group’s trade receivables and contract assets with 91 to 180 days past due and more than 181 days past due increased significantly from RM8.744 million in FY2018 to RM25.105 million in FY2019 and from RM3.122 million in FY2018 to RM58.054 million in FY2019
What are the reasons for the significant increase? What are the measures taken to recover the overdue trade receivables and contract assets?
ageing bucket is from bad debts associated with entry- level bundle acquisitions and device receivables from PF 365 instalment payment scheme.
towards increased adoption
digital payment methods, Digi also constantly and proactively pioneers initiatives to help maximise chances of recovery of
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