CelcomDigi Berhad - Steady Core Performance Amid Soft Topline
Fri, 23-May-2025 07:24 am
by Steven Chong • Apex Research

Counter

CDB (6947)

Target Price (RM)

4.00

Recommendation

Hold

  • CDB reported 1QFY25 CNP of RM421.5m which was within ours and consensus forecasts, accounting for 24.9% and 22.6% of forecasts respectively.

  • D&A charges are expected to increase in the coming quarters, normalising at a run-rate of RM725m per quarter.

  • Reiterate our HOLD recommendation with unchanged TP of RM4.00 based on WACC 6.5% and terminal growth of 0.5%.

 

Results within expectations. 1QFY25 CNP of RM421.5m came well within both ours and consensus expectation, making up to 24.9% and 22.6% of forecasted CNP respectively. CNP was derived after stripping out one-off adjustments of RM37.7m (Fixed assets disposal losses: RM13.8m, allowance for credit loss on receivables: RM31.7m and others: -RM7.8m)

 

YoY. 1QFY25 CNP rose +4.0% yoy, thanks to prudent cost management efforts that reduced operational expenditure, as well as lower D&A. Revenue for the quarter grew mildly to RM3.2bn (+1.2% yoy) mainly driven by subscriber growth in postpaid and home fibre from higher take-up rate on its convergence plans.

 

QoQ. CNP increased by +15.7% qoq mainly due to the absence of one-off ROU asset impairment and lower depreciation recognised. That said, revenue for the quarter slid -1.2% qoq, dragged by the prepaid segment given the seasonally softer usage, fewer calendar days, and lower interconnect rates.

 

Outlook. Management remained committed in achieving its low single-digit service revenue growth guidance, despite the tepid performance in 1QFY25. This is underpinned by various ongoing initiatives, including strategic pricing of its product offerings and the rollout of enterprise NetCo solutions. We also note that D&A for the quarter stood at RM625m, below the normalised run-rate of RM725m, due to an audit adjustment carried forward from FY24. As this was a one-off adjustment, we expect D&A charges to increase in the coming quarters. Meanwhile, 1QFY25 capex-to-sales remained relatively low at 5.6% (vs the full-year guidance of 14–16%) as 5G integration-related spending has yet to commence. Consequently, we foresee further acceleration in capital expenditure as the Group advances its 5G rollout plans and other network expansion initiatives.

 

Earnings Revision. Given that the reported earnings are deemed within expectations, we kept our forecast unchanged.

 

Valuation. Reiterate our HOLD recommendation with unchanged target price of RM4.00 based on DCF valuation (WACC of 6.5% with a long-term growth rate of 0.5%).

 

Risk. Aggressive price competition. Changes in government regulations. Higher-than-expected 5G capex affecting cashflow and dividend.

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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.

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