PETALING JAYA: CelcomDigi Bhd
is expected to deliver stronger earnings in the second quarter of financial year 2026 (2Q26) as merger-related cost synergies accelerate.
At the same time, a more rational pricing environment across Malaysia’s mobile industry is also anticipated to boost profitability, according to UOB Kay Hian (UOBKH) Research.
It expects CelcomDigi to recognise at least RM150mil in operating expenditure and cost of goods sold savings in 2Q26, a sharp increase from the RM41mil recorded in 1Q26, as benefits from the merger continue flowing through to its financial performance.
The group’s management has projected total synergistic cost savings of RM465mil for this year, with expectations for these savings to increase to between RM700mil and RM800mil annually by 2028.
UOBKH Research said RM163mil, or about 35% of the targeted savings, had already been reflected in the profit and loss statement during the first five months of 2026, with the remaining savings expected to be recognised over the coming quarters.
The research house believes the stronger cost efficiencies will progressively lift earnings through the rest of the year.
It also expects earnings to benefit from more disciplined pricing among Malaysia’s three major mobile network operators after industry-wide increases in postpaid and prepaid plan prices earlier this year.
It noted all three operators have raised tariffs by high single-digit percentages, which should support profitability in 2Q26 and 3Q26 despite higher customer churn, particularly among prepaid subscribers who may switch to mobile virtual network operators.
UOBKH Research said operators are increasingly offering larger data allocations and bundled services while maintaining elevated pricing levels.
“CelcomDigi drove rational price competition towards the end of 1Q26 and the other two players followed through.
“Collectively, all three players raised postpaid and prepaid prices by high single digits. We believe this may have a positive impact on 2Q26 and 3Q26’s earnings.”
On the regulatory front, it believes uncertainty surrounding Digital Nasional Bhd (DNB) could ease over the coming months.
It expects CelcomDigi to provide greater clarity on DNB’s financial position, capital expenditure requirements and operating costs, while the transfer of Finance Ministry’s stake in DNB to CelcomDigi, Maxis Bhd and YTL Power International Bhd is anticipated towards the end of the third quarter after the refinancing of a RM1.5bil government guarantee is completed.
UOBKH Research maintained its “buy” recommendation on CelcomDigi with a discounted cash flow-based target price of RM4.05 per share, representing a potential upside of around 35.9% from the current share price of close to RM3.
It said the stock offered an attractive risk-reward profile after trading around one standard deviation below its historical valuation average following foreign selling in June.
The research house trimmed its 2027 and 2028 earnings forecasts by 8% to reflect expected associate losses from incorporating DNB into CelcomDigi’s accounts and lower interest income.
Nevertheless, it expects stronger-than-anticipated service revenue growth from recent price adjustments, continued migration of prepaid customers to postpaid plans and improved customer stickiness to serve as earnings catalysts.
