Credit Suisse published a research report saying that the service revenue of Digitcom (0315.HK) fell 6.9% year-on-year in the second half of fiscal year 2020, and the 1.4% increase deteriorated sharply from the first half of the fiscal year. The main reason was that the novel pneumonia epidemic caused travel restrictions, which led to a 45% drop in roaming revenue. Service revenue for the full year fell 2.7% year-on-year, which is in line with expectations. Increased operating costs associated with 5G and corporate business performance further dragged down earnings before interest, tax, depreciation and amortization (EBITDA) and profit, which fell 11.7% and 37.6% respectively. Excluding one-time impairment, net profit fell 24.3%, in line with market expectations.

The bank said that although the group did not disclose the number of 5G users, the 5G customer situation was better than internal expectations. With the launch of the 5G iPhone in October, the group management is confident in the 5G business and will launch a 5G home broadband service this month.

Taking into account the impact of IFRS 16 and FY2020 results, the bank raised its FY2021 EBITDA and earnings per share forecast by 54.6% and 10.8%. The bank said that although the stock is cheap and the current price is 2.1 times the FY2021 enterprise valuation (EV/EBITDA), it is affected by roaming business and there is little chance of being revalued, so it maintains a neutral rating, and the target price is HK$4.7.