CIMB Research said the low to mid-single-digit growth guidance implies a FY25 pre-tax profit of RM2.8bil to RM3bil.
PETALING JAYA: CelcomDigi Bhd’s guidance of modest growth in pre-tax profit for the financial year 2025 (FY25) is due to the risk of potentially higher costs for the final phase of network consolidation as well as information technology (IT) system integration and talent refresh.
CIMB Research believes the guidance is realistic and addressed upside risk to costs.
The low to mid-single-digit growth guidance implies a FY25 pre-tax profit of RM2.8bil to RM3bil inclusive of non-cash accelerated depreciation, the research house estimated.
“CelcomDigi should be able to meet both its guidance and our forecast – and possibly exceed them if some of these costs end up milder,” CIMB Research stated in a report following a recent meeting with the telco’s management.
The research house noted it was hard to estimate CelcomDigi’s FY25 network integration costs as the final phase of site decommissioning involves negotiations with many site owners, which makes it hard to fully ascertain the cost at this stage.
The exercise may run into the second half of the year to accommodate the finalisation of Digital Nasional Bhd’s network plans by the remaining three shareholders.
CelcomDigi will also embark on IT system integration in FY25 and expects related costs to be lower than the network integration costs.
“As part of the merger conditions, CelcomDigi returned 20 MHz at 2,100 MHz in November 2024, with another 10 MHz at 1,800 MHz and 40 MHz at 2,600 MHz to be divested by November 2025.
"Based on the circular to shareholders on the merger in Oct 2022,
it was stated that, following handover of spectrum, the regulator will compensate CDB on a prorated basis for the remaining spectrum rights duration after undertaking due diligence. We estimate cost savings of RM38mil in FY25 and a further RM61mil in FY26,” the research house said.
CelcomDigi intends to spend about RM1.8bil to RM2bil in capital expenditure (capex) in FY25 for the IT system integration and upgrade. Its capex should be lower in FY26.
The telco stated it will stick to its policy and focus on sustaining and growing its dividend per share, even in the event of any temporary dips in free cash flow.
This is because it remains confident of delivering steady-state pre-tax cost savings of RM700mil to 800mil per year in the profit and loss statement by FY27, CIMB Research added.
The research house maintained its “buy” call on CelcomDigi with an unchanged discounted cash flow-based target price of RM4.10 a share.
