Maybank IB Research said CelcomDigi is awaiting meaningful crystallisation of synergies.
PETALING JAYA: Analysts are positive about CelcomDigi Bhd’s third-quarter results for the financial year 2024 (3Q24), but many have kept their forecasts unchanged while waiting for more clarity on the industry’s 5G structure, as well as the telco group’s strategies ahead.
Kenanga Research, which has an “outperform” call on CelcomDigi, in a report said it will reassess its valuation “when more clarity emerges”.
The research house has also lowered the stock’s target price (TP) to RM3.82 from RM5.59 previously.
“This is to reflect our view that a resolution on the 5G dual network by the first quarter of 2025 to drive a re-rating for mobile network operators is no longer expected to hold,” Kenanga Research added.
In addition, UMobile Sdn Bhd’s recent surprise win of the second 5G network over CelcomDigi and Maxis Bhd
, introduces uncertainties on the timeline and outcomes.
Kenanga Research, however, said it continues to like CelcomDigi for the potential merger synergies, which are expected to amount to net present value of RM8bil over five years, emanating from network (RM5.5bil), information technology (RM1.1bil) and others (RM1.4bil).
In addition, the group’s robust average free cash flow yield of 7.3% in the financial year 2024 (FY24) to FY25 implies capacity to pay steady dividends as well as having the largest mobile subscriber base in Malaysia.
Meanwhile, CGS International Research (CGSI Research) in a note to clients said CelcomDigi is growing its profits again and giving better dividends.
“We estimate that CelcomDigi will deliver 62.5% year-on-year net profit growth in FY25 as merger related costs, including accelerated depreciation, eases,” the research house noted.
CelcomDigi’s management estimated merger synergies of RM700mil in terms of capital expenditure (capex) and operational expenditure were achieved in the nine months of 2024, with a longer-term RM800mil per annum in savings expected from FY27 onwards.
However, the management abstained from providing any updates on the 5G situation, said CGSI Research.
“We hold our view that CelcomDigi will operate the first network currently under Digital Nasional Bhd,” it added.
The research house has reiterated an “add” call on the stock with an unchanged TP of RM4.50
In a report, Maybank Investment Bank (Maybank IB) Research said CelcomDigi is awaiting meaningful crystallisation of synergies.
No further updates were provided by the management on the 5G situation, it said.
“We believe 5G-capex risk is largely priced-in for CelcomDigi and the stock could re-rate when merger synergies begin to manifest more meaningfully from FY25 onwards,” it said.
The research house reiterated a “buy” call on the stock with an unchanged TP of RM4.50.
It noted the net synergies achieved thus far have been more capex-oriented, with integration cost likely peaking in FY24.
RHB Research, meanwhile, has maintained a “buy” call on CelcomDigi with a lower TP at RM4.35 from RM4.55 previously.
It said CelcomDigi’s results were broadly in line with the pressure on prepaid revenue likely behind it.
“The significant share price under performance is reflective of the 5G quagmire, in our view,” it said, adding that stronger merger synergies are a key stock re-rating catalyst.
