CIMB Research said it expects further stabilisation in CelcomDigi’s prepaid subscriber base in 4Q24.
PETALING JAYA: Benefits from gross synergies at CelcomDigi Bhd could largely be offset by a normalisation of other expenses which was abnormally low previously, says CIMB Research.
The research house is expecting the telecommunications provider to register flat core net profit (CNP) in the group’s upcoming fourth quarter of financial year 2024 (4Q24) results.
“Our current forecast for the financial year 2024 (FY24) implies a 4Q24 forecast CNP of RM538mil, or 11% quarter-on-quarter (q-o-q) growth. However, we think the forecast 4Q24 CNP could end up being roughly flat q-o-q.
“While gross synergies should further rise q-o-q in 4Q24 (on savings from voluntary separation scheme and removal of overlapping cell sites / retail stores), this could be largely offset by a normalisation of other expenses, which was abnormally low in 3Q24 owing to reversals for over-accrual of site rental in the first half of 2024 (1H24),” CIMB Research said.
Further, device cost is also projected to increase q-o-q due to seasonally higher sales. Nevertheless, the research house said CelcomDigi’s full-year CNP should still be largely within 5% of its (RM1.81bil) and consensus (RM1.74bil) FY24 forecasts.
“We currently project a 3.3 sen dividend per share (DPS) (yield: 0.9%) for 4Q24 (3Q24: 3.6 sen; 4Q23: 3.5 sen).
“We acknowledge that this could be on the conservative side as CelcomDigi’s DPS has been steady to higher, sequentially, since 1Q23,” the research house said.
CIMB Research added it expects further stabilisation in CelcomDigi’s prepaid subscriber base q-o-q in 4Q24. In 3Q24, the group’s net subs losses narrowed after a sizeable churn of one-time SIM card users in thw first half of last year due to repricing and product harmonisation initiatives.
“Meanwhile, CelcomDigi’s postpaid subscriber base should continue growing, driven by pre-to-postpaid migration and good take-up of converged plans.
“Thus, we expect total service revenue in 4Q24 to be flat to mildly up q-o-q (but down 1% to 2% year-on-year),” CIMB Research said. Earnings before interest, taxes, and amortisation margins of CelcomDigi may also be lower by one to two percentage points q-o-q owing to seasonally higher device cost and normalisation of other expenses.
“However, we expect a one to two percentage points improvement year-on-year due to higher net synergies. In terms of network integration and modernisation, we think CelcomDigi is likely to have met its target of 75% completion by end of FY24, which should put it on track for full completion by mid of FY25, in our view,” the research house said.
CIMB Research maintains a “buy” call on CelcomDigi with an unchanged target price of RM4.20.
The key re-rating catalysts are strong FY25 to FY26 forecast core earnings per share growth of 17% to 18% year-on-year and finalisation of Digital Nasional Bhd’s shareholding structure in the next three-to-six months.
CelcomDigi closed at RM3.80 per share on Monday.
