Digi Communications shares value decreased 32.5 percent from the start of the trading on the Bucharest Stock Exchange (BVB) until today. Financial results and a high level of indebtedness are the reason for the fall of one of the biggest mobile carriers and cable tv operator. This means that if you bought RON 1,000 worth of shares in the first day of trading now you would have only RON 675.
Digi was listed on May 16, 2017, after an initial public offering in which the share price was set at RON 40 (for institutional investors). On the first day of trading, the stock quote went to RON 41.2 and that was one of the only sessions when the investors were on profit because the price went down afterwards.
After going up and down on a downward trend the share ended the year at RON 38, a 7.7 percent decrease from the day of listing. This year was no better for the share quote reaching new lows every month. And yesterday, August 20, had registered a historical low at RON 27.8, showing a 26.1 percent decrease from the beginning of the year and a 32.5 percent from the first day of trading.
Taking of a third of the value can be quite disturbing for investors. But the difference between selling the share and keeping it and wait for the rebound is made by the reason of the down-trend.
In the first semester of the year the company recorded a net profit of EUR 15.3 million, down 50 percent from the same period from 2017. The revenue were up by 6.9 percent to EUR 475.8 million, but from Romania, the main market for the company, the increase was only 1.6 percent, from EUR 329.7 million in 2017 to EUR 335.2 million this year.
The operation costs, while down in Romania from EUR 222.4 million to EUR 205.78 million, went up from EUR 399.1 million to EUR 416.5 million. But the debt also increased in the first six months from EUR 730.05 million at the end of 2017 to EUR 878.3 million. Together with fall of the profit, this level of indebtedness is the main reason for the share price to go down.
Small investors are not pacient for a share to rebound so they sell at the first sign of trouble. But big investors, like the institutional ones, are looking at the long term for a company so they can wait for the rebound. The company has a good cash-flow and the business in Romania is stable and profitable so there are no significant problems in returning the credits.
Also, it looks like the bet put on the mobile telecommunication services is winning; the turnover from Cable TV, in the first semester, was EUR 93.7 million (up 4 percent), the revenue from fixed and internet data was EUR 89 million (up 4.8 percent) and the one from mobile telecommunication services was EUR 88.1 million (up 14.1 percent).