PETALING JAYA: Total costs for CelcomDigi Bhd (CDB) are likely to be lower in the second half of 2024 (2H24) as its core business remains resilient.
For the full year, its service revenue should increase by a low single-digit growth rate, while its earnings before interest and tax (Ebit) might decrease by a single-digit rate led by its internal restructuring expenses.
RHB Research believes the 5G wholesale cost is set to rise further for the group in 2H24 through to the financial year ending December 2025 (FY25).
It said CDB booked RM37mil in 5G cost in 1H24, relative to the nominal RM4mil in 1H23.
It expects this to rise further in 2H24 and FY25 on the back of higher 5G traffic.
It raised FY25 and FY26 earnings by 14% and 11% after factoring in larger (backloaded) synergies, partially mitigated by higher 5G wholesale costs. Its FY24 numbers have been largely maintained.
Meanwhile, CDB’s capital expenditure (capex) to total revenue ratio is around 15% to 18%, said TA Research.
The research unit has retained its “buy’’ call with a target price (TP) of RM4.58 a share, while RHB Research has upgraded it to a “buy’’ from its “neutral’’ hold with a new TP of RM4.55 a share from RM4.35.
UOB Kay Hian Research said CDB declared its second interim net dividend per share (DPS) of 3.5 sen per share (101% dividend payout), similar to the past two quarters.
It projects a 2024 and 2025 net DPS of 15.7 sen and 18.4 sen, respectively. This translates to a net dividend yield of 4.4% and 5.1% for 2024 and 2025, respectively.
It has also maintained its “buy’’ call with a TP of RM4.50 a share, adding that the TP reflects potentially higher synergistic savings in 2025 after incurring significant integration costs in 2024.
AmInvestment Research said CDB’s prospects are positive over the long term, as the group has a competitive advantage due to its substantive spectrum holdings of 125MHz (versus Maxis’ 115Mhz).
It maintains its “buy’’ call with an unchanged TP of RM4.40 a share. The key downside risks cited include continuous service disruptions, which may impede subscriber retention rate, regulatory risks from changes to 5G arrangements, and higher-than-anticipated integration costs.
CDB is on track to meet synergy targets, as the merger is expected to realise net present value synergies worth RM8bil – from network (RM5.5bil), IT (RM1.1bil), and others (RM1.4bil).
In 1H24, TA Research said the group successfully realised over RM700mil in gross synergy, and is expected to achieve at least another RM500mil in 2H24.
The network integration and upgrading are progressing ahead of schedule, with more than 50% of the targeted sites completed within a year. At this rate, the group aims to complete 75% of network upgrades by the end of 2024.
It said the group has started to see more positive outcomes from the network integration and modernisation, including improvements in signal quality, average speed, data traffic, monthly data consumption and a reduction in customer complaints.
