DIALOG: Underlying Profit Stability Drives Positive Market Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates a steady underlying financial performance for a prominent regional telecommunications group, despite facing significant headwinds from foreign exchange fluctuations. The report highlights resilient underlying profit growth, supported by robust contributions from key operating units, leading to a positive market outlook.
Performance Review
For the full financial year 2025 (FY25), the company’s underlying profit after tax and minority interests (PATAMI) saw a notable increase of 36.3% year-on-year to RM537 million. This performance was deemed to be in line with both the investment bank’s and consensus estimates. However, reported revenue declined by 6.3% year-on-year to RM11,758 million, primarily attributable to the unfavourable impact of foreign currency translation, as the stronger Ringgit affected operations in various countries.
The positive underlying performance was largely driven by significant contributions from its operating units. CelcomDigi (CDB) reported a 59.9% year-on-year increase in profit before tax (PBT), while Dialog saw its PATAMI surge by 47.9% year-on-year. Robi also contributed positively with a 3.3% year-on-year increase in PATAMI. Furthermore, the group demonstrated improved cost efficiencies, with operating costs declining by 16.3% in the fourth quarter of 2025 and 3.2% for the full FY25.
Key Challenges
Despite the underlying strengths, the group faced several challenges. The persistent unfavourable foreign exchange translation significantly dampened reported headline numbers. Additionally, Linknet continued to be a drag on performance, recording a loss of IDR1,449 million and contributing to a goodwill impairment of RM543 million. These factors underscore the volatile operating environment the company navigated during the period.
Future Outlook
Management has indicated ongoing efforts to monetise infrastructure assets, with a target to finalise these initiatives within the current year. While the potential sale of assets like Linknet could positively impact financials, there is an expectation that such a divestment might result in a one-time loss. The outlook is also tempered by uncertainties surrounding Digital Nasional Bhd (DNB), which are noted as potential downside risks to the company’s future performance.
