CDB: Full-Year Profit Misses Expectations Amidst Elevated Operating Expenses

CelcomDigi Bhd’s (CDB) net profit for the financial year 2025 (FY25) reached RM1,514 million, falling short of both internal and consensus expectations, achieving 92% and 91% of estimates respectively. This underperformance was primarily attributed to higher-than-anticipated operating expenses throughout the year.

Fourth Quarter Performance

In the fourth quarter of FY25, revenue demonstrated a robust improvement, increasing by 5.2% year-on-year to RM3,445 million. Service revenue saw a 4.1% year-on-year rise, driven by stronger contributions from postpaid, home fibre, and enterprise solutions. Devices revenue also grew by 10.8% year-on-year. The company expanded its subscriber base by an additional 1% during the quarter, bringing the total to nearly 20.6 million. Significant growth was observed in home & fibre (+52.4%) and enterprise (+23.8%) segments, with blended average revenue per user (ARPU) ticking up by 2.6% year-on-year.

Despite the revenue growth, the quarter’s EBITDA margin compressed by 6.7 percentage points year-on-year and 2.3 percentage points quarter-on-quarter, settling at 40.6%. However, net profit after tax and minority interests (PATAMI) for 4QFY25 surged by an impressive 123% year-on-year to RM353 million. This substantial increase was largely due to lower depreciation and amortisation expenses, following the full decommissioning of network and ROU assets in 4QFY24, coupled with reduced provisions during the quarter.

Outlook and Strategic Initiatives

Looking ahead, the telecommunications landscape in Malaysia presents near-term earnings risks, primarily stemming from the ongoing implementation and monetisation of 5G, as well as uncertainties surrounding Digital Nasional Berhad (DNB) in terms of final shareholding and its potential financial impact. Internally, the company’s network integration and modernisation are nearing completion, with IT integration targeted for FY27F. The company anticipates realising annualised cost savings of RM700-800 million from FY28F onwards once full synergy is achieved.

Management believes there is still considerable scope to extract further value from its ongoing integration efforts, which could accelerate ARPU recovery and strengthen market position. The company plans to enhance its offerings by upselling value-added services, such as cybersecurity and IT solutions, and intensifying efforts to retain its high-value customer base. However, in view of the slower-than-expected value capture from the merger and higher operating expenses than previously anticipated, analysts have revised their FY26F/FY27F net profit forecasts downwards by 10.8% and 11.1% respectively.

A final interim dividend of 3.60 sen per share was declared, bringing the year-to-date dividend to 14.70 sen. The investment bank maintains its “Neutral” rating on the stock, with a revised target price of RM3.50, trimmed from the previous RM3.80.