CDB: Telco Posts Resilient Performance, Drives Forward with Integration Success

A prominent telecommunications company delivered a resilient financial performance for the fiscal year 2025, with its core profit of RM1,683 million aligning with consensus expectations, despite being slightly below some analysts’ internal forecasts. The year was marked by robust top-line expansion and strategic progress in network and IT integration.

Performance Review

For FY25, the company recorded a 1.1% year-on-year increase in service revenue, reaching RM10,908 million, primarily fueled by strong growth across its postpaid, home fibre, and wholesale segments. Postpaid revenue advanced by 4.1% to RM4,355 million, driven by an uptick in higher-value subscribers and upgrades to convergence plans, leading to a total postpaid subscriber base increase to 6.09 million. The home fibre segment also demonstrated significant momentum, with revenue soaring 40.2% to RM258.0 million, albeit with some ARPU dilution (down 15.9% YoY) suggesting aggressive promotional activities.

Earnings Before Interest and Taxes (EBIT) saw a notable 15.6% surge to RM2,672 million, largely attributable to reduced depreciation and amortisation following the decommissioning of impaired network and right-of-use assets. However, the company’s core profit for the year experienced a 3.7% decline, attributed to higher-than-expected other expenses. In the fourth quarter of FY25, service revenue grew 3.8% quarter-on-quarter, though core profit saw a 2.2% decline, mainly due to higher depreciation and amortisation charges. The company also declared a fourth interim dividend of 3.6 sen per share, bringing the year-to-date dividend to 14.7 sen per share.

Future Outlook and Strategic Initiatives

Management has provided a positive outlook for FY26, anticipating low single-digit growth in both service revenue and EBIT, with a capital expenditure-to-total revenue ratio projected between 12% and 13%. A significant highlight is the nearing completion of its extensive three-year integration exercise, with over 90% of network integration and more than 80% of IT systems consolidation already accomplished. This integration is expected to yield substantial annual cost savings of RM700 million to RM800 million from 2027 onwards. The investment bank also introduced an FY28 earnings forecast of RM1,987 million, representing a 7.5% growth. Furthermore, the proposed acquisition of Digital Nasional Berhad’s (DNB) stake from the Ministry of Finance is proceeding, with management confident in DNB’s future financial performance.

Investment Recommendation

In light of the company’s strategic progress and future growth prospects, TA Securities has reiterated its “BUY” recommendation, maintaining its target price.