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PRESENTATION BY MANAGEMENT
Digi At A Glance
Our Purpose and Strategy
2019 in Review
1Q2020 Key Highlights
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Covid-19 and Business Continuity Plan (BCP)5
2020 Outlook and Priorities6
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Digi At A Glance1
99%DIVIDEND PAYOUT
RATIO FY2019
RM6.5bnTOTAL REVENUE
FY2019
11.3mnCUSTOMERS
FY2019
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PURPOSE – Connecting YOU To What Matters Most
O U R B E H AV I O R
Always Explore
Create Together
Keep Promises
Be Respectful
O U R WAY O F WO R K
Customer Obsession
Innovation 360
O U R S T R AT EGY
Purpose & Strategy2
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FOCUSED STRATEGIC PRIORITIES
GROWTH EFFICIENCY &SIMPLIFICATION
WINNING TEAM
RESPONSIBLEBUSINESS
• Capture new growth from consumer and B2B business
• Derive more value from existing customer base
• Invest in competitive network
• Continue digital transformation
• Drive multi-year, structural operational efficiency initiatives to ensure profitable business
• Strengthen inclusivity at workplace
• Upskill organisationalcapabilities and build critical digital competencies
• Ensure secure and sustainable business conduct, adhering to high governance standards
• Focus on improving economic, environmental, and social priorities
Purpose & Strategy2
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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 & Strategy2
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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 on MyDigi App
✓ 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-farmedspectrum 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 & Strategy2
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Indexed to 100
Share Price Performance against Bursa Malaysia's KLCI since 2 Jan 2020 Digi KLCI2 Jan’19
KLCI1,588.76
points
DIGIRM4.46
4.1%Dividend Yield
12.27xEV/EBITDA Ratio
24.69xP/E Ratio
8.5 senNet assets per share
#9 Most Valuable Stock On FBM KLCI
28 May’20
KLCI1,457.50
points
DIGIRM4.48
RM34.8 billion Market Capitalisation
YTD %
+0.5%
-8.3%
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RESILIENT SHARE PRICE PERFORMANCE VS FBM KLCI 2019 in Review3
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GROWTH EFFICIENCYDIGITALTRANSFORMATION
↑11.0%Internet and digital revenue
↑11.9%Postpaid revenue¹ with over
3.0 million subscribers
↑6.0%B2B revenue
Digi Home Fibre - Sabah and Klang Valley
↓ 0.2% Opex or RM1.97 billion
46%EBITDA Margin
RM753 millionCapex 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 365Digital Workplace
5GOpenLab & pilots
¹ Excludes contract assets amortisation
SOLID DELIVERY ON KEY FOCUS AREAS
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2019 in Review3
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GUIDANCES MET DRIVEN BY FOCUSED STRATEGY
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A C T U A L P E R F O R M A N C E W I T H I N G U I D A N C E S
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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 O W 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 Review3
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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
6.355.79
2015 2016 20182017
-0.13 -0.20
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
1.721.63
1.48 1.54 1.50
2015 2016 2017 20192018
PAT (RM billion)
PAT Margin (%)
99 100 99 99 99
22.0 20.9 18.8 19.6 18.2
18.4
22.1 21.019.0 19.8 19.2
20172015 2016 2018 2019
EPS pre MFRS-16 (sen)
EPS post MFRS-16 (sen)
Payout Ratio (%)
DPS (sen)
• EPS: Earning per share • DPS: Dividend per share
2019 in Review3IMPROVED 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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• Solid assets anchored on prudent allocation of resources and asset management, pursuant to MFRS 16 adoption
• Sufficient to execute our strategic priorities for future growth
22%
78%
Current Asset Non-Current Assets
• Conventional debt over total assets of 10%, well below the 33% threshold to qualify as a Shariah-compliant stock
• Low net debt over EBITDA ratio of 1.6 times
• Equipped with a balanced capital structure and financial facilities
• This credit rating reflects our well-established position in the industry, excellent profitability and robust cashflow
Total AssetsRM8.15 billion
45%
15%
40%
Islamic Conventional Finance Leases
Total BorrowingsRM5.15 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 Review3
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Our Network Footprint
3G: 93%4G: 91%
LTE-A: 72%Population Coverage
300+4G Cities & Towns
+3ppY-Y Network Net Promoter Score
9,610 KMFibre Network
PRIORITISING ROBUST 4G PLUS NETWORK COVERAGE
as at FY2019
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2019 in Review3
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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 ofNational 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 TourismMalaysia’s 1st
Real-Time Medical Data
2019 in Review3
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Golden Globe Tigers 2019 -Malaysia’s Best Employer Brand Award
• Delivering on our promise to provideconsistent, 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
• Adhering to highest standards of Corporate Governance
Southeast Asia 2019 – Best Islamic Finance Deal
• Achieving competitive coupon rate for our RM900 Million Sukuk Murabahah 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
• Recognising our commitment to minimise environmental impact and advocate safe internet usage and digital inclusion
• Building trust in our brand as we protect customer data and deliver safe services
• Recognising our continuous focus to drive superior Internet and Digital experience
2019 in Review3
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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 Review3
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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%
G R O W T H
R E S P O N S I B L E B U S I N E S S
E F F I C I E N C Y & S I M P L I F I C AT I O N
✓ Revised and updated Data, Privacy and Security policies
✓ Future Skills For All programme by Yellow Heart, in
collaboration with MDEC and UNICEF
W I N N I N G T E A M
✓ Office 365 trainings across all functions
✓ Introduction of new Cyber Security and Privacy
courses for employees
1Q2020 Highlights4
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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 BCP5
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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
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NETWORKPrioritise tuning and optimisation of systems as traffic shifts online
War room to monitor health of customer-facing and back-end systems
Collaborate with business to mitigate and explore options to reduce outages
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IT
Covid-19 and BCP5
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KEEPING CONSUMERS AND BUSINESSES CONNECTED
Resume full operations on ground with new SOPs1
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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 BCP5
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OUTLOOK – WELL POSITIONED TO MANAGE GROWTH
Source: BNM’s 2019 Economic Monetary Review
• Macroeconomic forecasts remain fluid, dependingsignificantly on evolving Covid-19 pandemic situationand public health policies.
• Malaysia’s 1Q2020 GDP slowed to 0.7%, the lowestsince 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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Thank you, Heroes!
[email protected] l www.digi.com.myThis report was produced over the course of the Movement Control Order, with full adherence to safety measures and our business continuity plan guidelines. 22
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RESOLUTIONS OF AGM
AGENDA 2a) 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 3To 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 4To approve the payment of Directors’ fees and benefits payable to the Independent Directors (Resolution 4)
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AGENDA 5To re-appoint Messrs. Ernst & Young PLT as Auditors of the Company and to authorise the Directors to fix their remuneration (Resolution 5)
AGENDA 6Proposed Retention of Tan Sri Saw Choo Boon as a Senior Independent Non-Executive Director (Ordinary Resolution)
AGENDA 7Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature, to be entered with Telenor ASA and Persons Connected with Telenor (Ordinary Resolution)
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 orarising from this discussion which are not of historical facts are statements of future expectations with respectto financial conditions, results of operations and businesses, and related plans and objectives. Such forwardlooking statements are based on Digi’s current views and assumptions including, but not limited to, prevailingeconomic and market conditions and currently available information. These statements involve known andunknown risks and uncertainties that could cause actual results, performance or achievements to differmaterially from those in the forward-looking statements. Such statements are not and, should not beconstrued, as a representation as to future performance or achievements of Digi. In particular, such statementsshould not be regarded as a forecast or projection of future performance of Digi. It should be noted that theactual performance or achievements of Digi may vary significantly from such statements.
DISCLAIMER
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Q&A SESSION
23rd ANNUAL GENERAL MEETING
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RESPONSES TO QUESTIONS RAISED BY MSWG
The outlook for 2020 includes, among others, thefollowing:• Increase in internet adoption and data usage given
the growing focus on the digital economy andadoption of future technologies.
• Companies and consumers are forced to adapt to anew normal during the Covid-19 global pandemic,leading to a change in consumer behaviour
• Increased focus on quality of service (QoS) by theMalaysian Communications and MultimediaCommission (MCMC) during this unprecedentedCovid-19 crisis.
(Page 16 of Integrated Report - IR)
Please brief on how the Group would strategisespecifically to address the outlook in 2020.
• We will prioritize focus on the execution of our strategyto remain a leader in enabling reliable connectivity for allMalaysians.
• This strategy includes:- Delivering growth through relevant value-for-
money customer offerings that meet thecontinuous demand for connectivity and digitalservices.
- Being a leader in digitalisation and modernisation,from the way we run our network, engagecustomers across digital and physical touchpointsand instill a culture of innovation and agility.
- Raising responsible business standards across ouroperations, in the way we manage our value chain,treat customer data, environmental impact andadvocate 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 opportunities under items (ii) and (iii) above especially on revenue contribution to the Group?
a) Good progress towards readiness for 5G- Modernization of network and IT systems including
virtualization and advanced security- 5G OpenLab, 5G Demonstration Projects and
Showcases to trial new use cases, and- Collaboration with Telenor BUs who have launched
commercial 5G plans.
We will continue to build on this, towards 5G commercialpilots and launch in line with future guidance from MCMCon 5G spectrum process and timelines.
b) Although still early days on revenue contribution, we seesolid progress in enabling a wider base of SMEs, corporatesand mass consumers on their digitalization journey through:- B2B solutions incl. offshore LTE coverage, dedicated
internet access and branch-to-branch connectivity,- Digital business solutions - Omni, iFleet, altHR- Digital services for consumers - MyDigi 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. Postpaidand prepaid internet subscribers increased 222,000 to9.7 million, representing 85.9% (2018: 81.2%) of the11.3 million subscribers.
a) What is the current percentage mix betweenpostpaid and prepaid internet subscribers, thepreferred optimal mix and preferred realisticblended ARPU?
a) What measures are being taken to achieve thepreferred optimal mix and what are theachievements to-date?
a) Postpaid and prepaid internet represent 26.9% and 59.0%of total subscribers mix. While it’s hard to state an optimalmix and preferred ARPU, we believe that our strategy tofocus on sustainable postpaid and prepaid internet basefueled by relevant and personalized bundled offer will pavethe way for revenue growth and stronger ARPU in the midto longer term.
b) Disciplined focus on driving postpaid growth and qualityprepaid acquisitions with strong internet adoptionunderpinned by:- Channel transformation initiatives to modernize
channel readiness to support our internet growthambition, combined with affordable, worry-freeinternet plans
- Base management activities and segmentised offerings
These measures effectively improved revenue mix qualityand set a solid foundation for service revenue resilienceand growth opportunity.
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RESPONSES TO QUESTIONS RAISED BY MSWG
The consistent focus in driving growth and efficienciesenabled the Company to sustain the industry-leadingEBITDA margin at 46%, despite challenging marketconditions and topline pressure. (Page 32 of IR)
What is the average industry EBITDA margin? What arethe specific measures taken to improve the EBITDAmargin?
• On comparable post MFRS-16 industry benchmark, DigiEBITDA margin stood at 53% in FY19, ahead of industrymargin which range between 39% to 41%.
• We have over the years been disciplined in drivingprofitable growth in our product offerings, drivingefficiency and simplification in our business processesvia digitization and operating model innovation as wellas structural efficiency initiatives to generate long termvalue creation.
• During this unprecedented economic environment, Digicontinues to reprioritize spend via scope reviews andrenegotiation of contract and optimize non-essentialspend 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 areall navigating new ways of educating our children,running businesses, maintaining critical societalfunctions, while trying to ensure the health andwelfare of those around us. (Page 34 of IR)
Given the Covid-19 pandemic, to what extent has itimpacted business and how are you preparing yourselfto face the new business landscape?
• While it is too early to share the exact impact on ourfinancial performance, we did see slower revenuedevelopment due to Covid-19 related impact on traveland closure of stores and dealer touchpoints. We willhave a clearer view of this when we announce our Q22020 results.
• As the effects of the Covid-19 pandemic emerge andeconomic activities resume, we are taking a practicalview of our business and protecting cash flow throughcost measures and financial flexibility, with a practicalview on earnings parameters for the remainder of 2020.
• We believe our steadfast focus on executing ourstrategy in the last few years has prepared us and willhelp us manage through the new, emerging businesslandscape.
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RESPONSES TO QUESTIONS RAISED BY MSWG
There will be further revision to the mobiletermination rates effective 1 January 2020 asprescribed in MCMC’s Determination 1, 2017 ofMandatory Standard on Access Pricing made on 20December 2017 as follows:
Please explain how, and to what extent, this willimpact the Group’s business.
• The revision in regulated mobile termination rates from1 January 2020 will result in overall lower interconnectrevenue and cost for Digi and across the industry.
• In 1Q 2020, Service Revenue growth of 0.7% Year-on-Year (YoY) trimmed -1.1 percentage points to -0.4% YoYdue to Interconnect Revenue decline of RM15 millionYoY and RM16 million Quarter-on-Quarter (QoQ).
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RESPONSES TO QUESTIONS RAISED BY MSWG
The Company has actively re-farmed the diversespectrum portfolio to deliver a stronger, moreconsistent 4G network experience for customers,supported by an expanded fiber network footprint of9,610KM.
In October 2019, the Company announced apartnership with TM Global to enable Digi customersto enjoy affordable internet access across 7,000 WiFihotspots nationwide. (Page 39 of IR)
What are the respective targeted expanded fibernetwork footprint and number of WiFi hotspots andtimelines?
• We aim to continue our fiber network expansion to over9,800 KM by end 2020 with 81% of our total sitesfiberized or with 1 hop to fiber.- Leverage on industry collaboration to optimize
existing fiber footprints- Signed a Memorandum of Understanding (MoU)
with Maxis and Celcom in March 2020 to explorejoint fiber infrastructure development to efficientlydeploy fiber backhaul and rollout fiber to basestations in Malaysia.
• We have always viewed partnerships as a positive wayforward to deliver affordable, widespread connectivityto all Malaysians; with some of our current sharinginitiatives now ongoing for close to a decade.
• Our efforts on fiberisation will enable stronger 4Gconnectivity nationwide, in line with the government’sNFCP ambitions.
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RESPONSES TO QUESTIONS RAISED BY MSWG
Allowance for expected credit losses (AECL) on tradereceivables and contract assets has increasedsignificantly from RM48.020 million in FY2018 toRM77.660 million in FY2019. (Page 124 of IR)
What are the reasons for the significant increase?How much is attributed to contract assets and what isit’s nature?
What is the probability of recovery and measurestaken to recover the trade receivables and contractassets?
• The increase in allowance for expected credit losses(“AECL”) on trade receivables is in line with the strongpostpaid revenue growth of 9.8% YoY, with higherallowance attributed to increased entry-level devicebundle 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 thanindustry average of 3.4%.
• AECL on contract assets improved to RM2.4 million fromRM3.7 million, a year ago due to a shift in postpaidacquisition focus from upfront device bundle contractsto device financing with instalment payment over a 24-months contract period.
• Although receivables recovery may be impacted byprevailing economic conditions, we have in place solidmeasures to support effective collections and recoveryactivities while exploring new initiatives to maximisereceivables recovery.
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RESPONSES TO QUESTIONS RAISED BY MSWG
Group’s trade receivables and contract assets with 91to 180 days past due and more than 181 days past dueincreased significantly from RM8.744 million in FY2018to RM25.105 million in FY2019 and from RM3.122million in FY2018 to RM58.054 million in FY2019respectively. (Page 150 of IR)
What are the reasons for the significant increase?What are the measures taken to recover the overduetrade receivables and contract assets?
• The increase in trade receivable balances in past dueageing bucket is from bad debts associated with entry-level bundle acquisitions and device receivables from PF365 instalment payment scheme.
• In addition to collection and recovery efforts gearedtowards increased adoption of digital paymentmethods, Digi also constantly and proactively pioneersinitiatives to help maximise chances of recovery ofoverdue trade receivables and contract assets.
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