PETALING JAYA: CelcomDigi Bhd
’s earnings recovery is expected to gather pace over the next two financial years as merger synergies ramp up and improvements in commercial execution support profitability, says RHB Research.
The research house forecasts the mobile network operator’s (MNO) core earnings to grow 10% in the financial year ending Dec 31, 2027 (FY27), followed by a further 19% growth in FY28.
The projected recovery is driven by back-loaded operating cost synergies following the merger and better commercial execution as the group upgrades its customer relationship management (CRM) system.
Following a recent discussion with management, the research house said CelcomDigi remained on track to achieve its FY26 operating expenditure savings target of RM470mil, having recorded RM140mil in savings in the first half of the year.
“While the CRM upgrade is complex, management believes the guided completion timeline of the second half of FY27 remains realistic,” it added.
“We see the upgrade of its business support system, which forms an integral part of the CRM enhancement, driving stronger commercial execution going forward with improved service provisioning levels, customer satisfaction and monetisation opportunities,” it said.
On Digital Nasional Bhd (DNB), RHB Research said management would provide further clarity on the 5G network operator’s potential FY26 losses and plans to restore profitability following the release of its third-quarter results on Nov 19.
For now, the research house has factored in CelcomDigi’s share of DNB’s losses from the fourth quarter of FY26, assuming the network operator’s losses narrow to RM600mil in FY26, RM500mil in FY27 and RM400mil in FY28, compared with RM1.2bil in FY24.
However, RHB Research said the completion of DNB’s RM5.2bil syndicated Islamic term financing exercise has eased concerns over the need for further equity injections from its MNO shareholders.
To note, DNB announced on Oct 1 that it had completed the financing exercise to refinance its government-guaranteed revolving credit facility, which expired on Sept 29, and secure longer-term funding.
The exercise also preceded DNB’s planned transition to equal ownership among CelcomDigi, Maxis Broadband Sdn Bhd and YTL Power International Bhd, which was expected in early 4Q26.
Under the planned arrangement, the Minister of Finance Inc will exit as an ordinary shareholder but retain a special share to safeguard national interests and oversee key strategic matters.
With the three MNOs set to become equal shareholders, RHB Research expects them to unlock further efficiencies through network optimisation, infrastructure sharing and procurement savings over the medium term.
“The additional 100MHz of the 3.5GHz spectrum band assigned by the regulator should also improve DNB’s network capacity and coverage, helping it narrow the gap with the second 5G network, whose population coverage has reached 90%,” it added.
“Meanwhile, we see the transfer of DNB as an agency under the Digital Ministry to the Communications Ministryfacilitating stronger strategic alignment with regulatory policies and framework.”
Overall, RHB Research maintained a “buy” call on the stock, with an unchanged target price of RM3.70 a share.
The research house believes the sharp de-rating in CelcomDigi’s share price to a 52-week low is “excessive”, with the stock trading at nearly two standard deviations below its post-merger mean enterprise value-to-earnings before interest, tax, depreciation and amortisation.
“We continue to see compelling risk-reward for CelcomDigi following the sharp share price weakness,” it noted.
“The underlying thesis of expanding post integration synergies fuelling a stronger earnings rebound remains intact.”
It added that additional catalysts include sustained market repair and sector consolidation.
