CelcomDigi Berhad
Tue, 19-Nov-2024 06:51 am
by Steven Chong • Apex Research

Counter

CDB (6947)

Target Price (RM)

4.05

Recommendation

Buy

Summary

  • CDB reported 3QFY24 CNP of RM444.2m (-9.0% yoy, +5.3% qoq), bringing 9MFY24 CNP to RM1.29bn (+11.5% yoy), , accounted to 65% and 71% of ours and consensus forecasts respectively due to lower-than-expected net adds in postpaid subscribers.

  • As a result, we lowered our FY24-26 earnings by -16.1%/-14.6%/-5.5% to RM1.65bn/RM1.87bn/RM2.33bn respectively.

  • Maintained our BUY recommendation with a lower TP of RM4.05, based on key assumptions of WACC 6.9% and terminal growth of 0.5%.

     

Results Review

  • Results review. 3QFY24 CNP stood at RM444.2m, (-9.0% yoy, +5.3% qoq), dragged by normalisation of tax expenses, following the over-provision of deferred tax seen in 3QFY23. Revenue remained flattish at RM3.1bn (+0.7% yoy, -1.4% qoq) mainly led by growth in postpaid and home fibre segment.

 

  • Below expectations. 9MFY24 core net profit of RM1.29bn makes up to only 65% and 71% of both our and consensus expectations. The variance was mainly due to lower-than-expected service revenue which remain mostly flat at +0.6% yoy, compared to our expectation of +3.0% yoy. 

 

  • Operations Highlights. In 3Q24, total subscriber stood at 20.2m, down -1.6% qoq from 20.6m. Postpaid subscriber base grew modestly (+1.6% qoq, from 5.6m to 5.7m), while the decline in prepaid subscribers has started to slowdown (-0.8% qoq, from 12.9m to 12.8m) driven by reduced dependence on one-time SIM customers. ARPU for postpaid dropped (-3.2% qoq, RM63 to RM61) in tandem with higher uptake on attractive packages and competitive pricing. Elsewhere, prepaid ARPU (flat qoq to RM28) remained stable. Home fibre continues to show strong growth supported by new additions in subscriber base (+12.8% qoq, from 141k to 159k), with ARPU increased +5.8% qoq, from RM103 to RM109. 

 

  • Declared dividend of 3.6 sen per share. Expect a dividend of 3.5 sen per share in 4QFY24 potentially bringing, total dividend for FY24 at 14.1 sen per share, which translates into a dividend yield of 4.2% based on current share price of RM3.37.

 

  • Outlook. Outlook for 2024 was revised on the account of i) flat to slight decrease in Service Revenue (from single digit growth), and ii) single digit decline in EBIT (from flat growth). That said, we anticipate significant synergy savings starting in 2025, as the integration costs for the merger are expected to peak in 2024. Currently, gross synergy will surpass the Group’s internal FY24 guidance of RM700m, reaching c.RM1.1-RM1.2bn.

 

  • Valuation. Trimmed our CNP for FY24-FY26 by -16.1%/-14.6%/-5.5% to RM1.65bn/RM1.87bn/RM2.33bn respectively after slashing our service revenue forecast. Re-iterate our BUY recommendation with a lower target price of RM4.05 based on DCF valuation (WACC of 6.9% with a long-term growth rate of 0.5%).

 

  • Risk. Price slashing by competitors. Changes in government regulations. Higher-than-expected 5G capex affecting cashflow and dividend.

Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.455268 4.488135
EUR 4.716585 4.723137
CNY 0.616518 0.616862
HKD 0.572409 0.576643
SGD 3.318330 3.343262