CDB: Strategic Progress Underpins Positive Analyst View Despite Integration Costs
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
CelcomDigi reported its 3Q25 core earnings at MYR400.3 million, marking a 7.4% quarter-on-quarter and 8.4% year-on-year decline. This brought 9M25 core earnings to MYR1.21 billion. While these results were in line with RHB’s earlier lowered expectations, they fell short of broader Street consensus estimates by 30%.
Operational Resilience
Despite the mixed earnings performance relative to consensus, the company demonstrated notable operational resilience. The prepaid segment maintained stability, largely driven by a higher average revenue per user (ARPU) which helped offset a reduction in subscriber numbers. The company’s converged propositions also fueled strong growth in the postpaid segment, which expanded by 4.3% quarter-on-quarter, particularly benefiting from robust home fibre take-up. Substantial progress has been made on network integration, with over 90% of sites integrated and modernized by the end of September. This places the company firmly on track to meet its end-2025 integration completion timeline. Furthermore, year-to-date gross operational expenditure (opex) synergies are trending in line with expectations, reaching MYR119 million.
Future Headwinds and Outlook
Looking ahead, the company faces several headwinds, particularly in FY26. Integration costs are anticipated to remain elevated due to significant IT investments and upgrades, with Phase 2 of these upgrades slated to take up a substantial part of FY26. The potential decommissioning of additional rural sites will also contribute to these ongoing costs. Additionally, wholesale 5G costs are expected to increase further. One-off adjustments totaling MYR42 million after tax, including staff workforce rationalisation and provisions for bad debt, impacted 9M25 net earnings.
Management has reaffirmed its guidance for low-to-mid single-digit core EBIT growth, supported by similar low single-digit service revenue growth. Key risks identified include intense competition and the potential for weaker-than-expected integration synergies. However, the company’s strategic execution and operational momentum, alongside its commitment to integration timelines, are viewed by analysts at TA SECURITIES as foundational strengths that underpin a positive outlook, justifying a BUY recommendation with a target price of RM0.25.
