PETALING JAYA: Analysts say CelcomDigi Bhd
’s second-quarter results have fallen below consensus as challenges in growing the service revenue persist.
In a report, MBSB Research said in addition to that, the telecommunication company’s (telco) results for the first half of financial year 2025 (1H25) also came in below its and consensus expectations, making up 42.6% and 43.9% of financial year 2025 (FY25) earnings estimates, respectively.
According to the research house, revenue performance across the various segments was mixed, with consumer prepaid and enterprise mobile took a hit, while the growth from other segments was not enough to offset the decline.
It noted the improvement in its bottom line was mainly led by prudent cost management in both operating expenditure and capital expenditure (capex).
“Moving forward, while we acknowledge the various initiatives put in place to grow the key target segments, we anticipate competition will lead to a subdued revenue growth outlook,” it said.
With that, MBSB Research lowered its target price for CelcomDigi to RM3.67 from RM3.76 with a maintained “neutral” call and said it will revise FY25 to FY27 earnings estimates by between minus 8.2% and minus 9.4%.
BIMB Research said it will downgrade the telco to “hold” with a lower target price of RM3.80 from RM4.62 to reflect adjustments under new analyst coverage.
It is forecasting the telco’s earnings to expand at a modest 10.5% compounded annual growth rate (CAGR) from FY24 to FY27, reaching RM1.8bil.
“This pace reflects limited top-line growth amid intense market competition, alongside higher operating costs associated with 5G access, despite the company realising significant cost synergies from capex avoidance following its merger,” the research house said.
Meanwhile, RHB Research said it expects CelcomDigi’s core earnings to grow at a respectable 25% CAGR from FY25 to FY27 from the improvement in commercial execution and greater synergies from the completion of its information technology (IT) stack upgrades.
“With IT transformation cost and depreciation set to rise in 2H25, earnings before interest and taxes growth should normalise to guided levels,” it said.
On the telco’s integration, which reached 84%, the research house said that it had, however, slowed down over the quarter, which could be due to protracted discussions on remaining sites.
“Management said the industry has made some progress on the discussions with the government on the expanded sales and service tax levied on tower rental and leases, with a worst-case impact of RM100mil on an annualised basis, which is circa 5% of our forecast,” it said.
RHB Research is keeping its “buy” call on the counter, albeit with a lower target price of RM4.20 from RM4.40.
TA Research is also maintaining its “buy” call on CelcomDigi, but with an unchanged target price of RM4.50.
It also revised its earnings forecasts downwards by 6.7% after incorporating higher tax expenses.
The research house made note of CelcomDigi’s second interim dividend of 3.8 sen, which is the highest since its merger in 2022.
