Digi Com Berhad Case Study

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Introduction
DiGi.Com Berhad is listed on Bursa Malaysia and is part of the Telenor Group, a worldwide telecommunications provider. The issued and paid-up share capital of DiGi is RM77, 750,000 comprising 777,500,000 ordinary shares of RM0.10 each and a market capitalization of about RM40.27 billion. There are four Independent Non-Executive Directors sitting in the Board of Directors and another four Non-Independent Non-Executive Directors including Chairman, Morten Karlsen Sorby. The Chief Executive Officer (CEO) cum Managing Director is Mr. Lars-Ake Norling effective since April 1 2015.

In Malaysia, there are 11 million customers using Digi as it provides mobile voice, digital services and internet. By its goal of ‘Internet for All’, Digi
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Revenue in 2014 has grown by 4.23% or RM285 million compared to the last year’s figures. The net profit margin of 28.94% for 2014 has slightly increased from 25.33% in 2013. The reason why profit margin increased is because Digi.com Berhad was increasing the profit margin. Digi.com Berhad is adjusting these values to yield a bigger difference between expenses. Another reason would be Digi.com Berhad was increasing the sales price and just ignore the total expenses and cost of goods sold. Moreover, Digi.com Berhad was decreasing the cost of goods sold and did not decrease the sales price as well as did not increase the total expenses. While in 2013 and 2014, the operating profit margins were 31.78% and 37.69% which increased about 5.91%. The higher operating profit margin shows that Digi.com Berhad has lower fixed costs, thus provide more flexibility in deciding the prices to the management. An added measure of safety will be provided by the pricing flexibility for Digi.com Berhad during economic hard …show more content…
Digi.com Berhad’s gearing ratio has improved from 40.28% to 26.23%, which is consider as low geared since the gearing ratio is below 40%. A huge improvement is due to the board of directors in Digi.com Berhad authorized the sale of shares in the company used it for paying the down debt as well as reducing the working capital to speed up the collections from the debtors and reduce the inventory levels. Moreover, the reason why the gearing ratio in 2013 was 40.28% is because Digi.com Berhad had invested a total of RM 720 million in capital expenditure. Ratio shown that the interest cover becomes better from 49.24 times to 68.60 times. This means that the Digi.com Berhad has earnings before interest and tax that currently covers up to 68.60 times of its existing interest expense in year 2014. Digi.com Berhad is quite liquid and will not have any problems getting a loan to expand as Digi.com Berhad is making sufficient money to settle its interest obligations while having additional earnings left over to settle the principle payments. Furthermore, the debt to equity ratio was 1.53% in year 2014 and 1.23% in year 2013. This shows that the total long term borrowing is about 1.53% of the firm’s total equity. The proportion is increasing which means that Digi.com Berhad is being financed by creditors instead of internal positive cash flow as there is more debt in relation to

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