CELCOMDIGI Stable core, cautious outlook

TELECOMMUNICATION

CELCOMDIGI

(CDB MK EQUITY, DSOM.KL)

19 Aug 2025

HOLD
(Maintained)

Company Report

Paul Yap Ee Xing, CFA
paul.ee-xing@ambankgroup.com
+603 2036 2281

Rationale for report: Company Result

Price RM3.77

Target price RM3.85

52-week High/Low RM4.00/RM3.25

Key Changes

Fair value ⇔

EPS ↔

Financial Forecasts

YE to Dec	FY24	FY25F	FY26F	FY27F
Revenue (RM mil)	12,679.4	12,629.7	12,625.1	12,618.1
Core net profit (RM mil)	1,812.4	1,934.2	1,977.9	1,987.1
FD Core EPS (sen)	15.4	16.5	16.9	16.9
FD Core EPS growth (%)	(25.0)	6.7	2.3	0.5
Consensus Net Profit (RM mil)
DPS (sen)	14.3	16.5	16.9	16.9
PE (x)	24.4	22.9	22.4	22.3
EV/EBITDA (x)	9.8	9.3	9.4	9.5
Div yield (%)	3.7	4.3	4.4	4.4
ROE (%)	8.5	12.0	12.2	12.2
Net Gearing (%)	nm	nm	nm	nm

Investment Highlights

CelcomDigi’s (CDB) core profit declined 3% YoY, broadly in line with expectations. We like the stock for its resilient demand profile and respectable 4% dividend yield. Guidance remains unchanged and synergy realisation efforts are progressing well. However, in our view, upside is capped due to potential cash flow pressures from 5G-related capex and possible cost headwinds from the expansion of the Sales and Service Tax (SST). We retain HOLD rating with an unchanged TP of RM3.85/share.
Maintain Hold at TP of RM3.85. This is based on a target EV/Ebitda of 9.5x and CY26 Ebitda. The stock offers defensive appeal, underpinned by inelastic demand and a respectable dividend yield of 4%. For 1H25, the group declared a dividend of 7.5 sen per share, implying a payout ratio of 101%. However, execution remains the key risk, particularly if it fails to deliver on synergy targets.
Broadly within expectations. CDB’s core profit decreased by 3% YoY to RM863mil. This formed 45% and 47% of ours and consensus estimates. Service revenue declined by 0.7% YoY, caused by both consumer (-0.4% YoY) and enterprise (-3% YoY). Within consumer, growth in postpaid (+4% YoY) and home & fibre (+48% YoY) were offset by weaker prepaid revenues (-6% YoY). Prepaid churns are consistent with ongoing pre-to-post migration trends.
Ebit growth guidance driven by synergies. Management has maintained its 2025 guidance, projecting low single-digit growth in service revenue (1H25: -0.7% YoY) and low-to-mid single-digit growth in EBIT (1H25: +9% YoY), with the latter supported by synergy gains. The group reaffirmed its target of achieving steady-state annualised cost savings of RM700-800mil post-2027. YTD net synergies amounted to RM95mil. Network integration and modernisation efforts have reached 84% completion, while its retail transformation is progressing well, with nearly 60 new digital concept stores launched.
Lingering risks from 5G capex and potential SST cost pressures. Last Friday, the group announced that it had provided an additional shareholder advance of RM117mil, to facilitate 5G operations and assist the financial affairs of Digital Nasional Berhad. This brings the total shareholder advance to RM350mil. Once the 5G arrangement is finalised, further potential Capex requirements could exert cash flow pressures. Elsewhere, although industry engagements are ongoing, the expansion of the SST could introduce further cost headwinds.

Stock and Financial Data

Shares Outstanding (million)	11,731.5
Market Cap (RMmil)	44,227.8
Book Value (RM/Share)	1.37
P/BV (X)	2.8
ROE (%)	8.5
Net Gearing (%)	nm

Major Shareholders

Axiata Group (33.1%)
Telenor ASA (33.1%)
EPF (10.3%)

Free Float 23.3

Avg Daily Value (RMmil) 10.5

Price performance

	3mth	6mth	12mth
Absolute (%)	(5.0)	7.7	0.3
Relative (%)	(5.3)	8.3	3.3

EXHIBIT 1: 2Q25 EARNINGS SUMMARY

RMmil	2Q25	2Q24	YoY (%)	1Q25	QoQ (%)	1H25	1H24	YoY (%)
Revenue	3,178	3,106	2.3	3,209	-1.0	6,388	6,260	2.0
EBITDA	1,421	1,414	0.5	1,348	5.5	2,769	2,741	1.0
Margin (%)	44.7	45.5	-1.8	42.0	6.5	43.4	43.8	-1.0
Depreciation and amortisation	(682)	(751)	9.2	(654)	-4.3	(1,335)	(1,519)	12.1
EBIT	740	664	11.5	694	6.6	1,434	1,222	17.4
Interest income	5	3	89.3	3	72.4	8	23	-65.8
Interest expense	(147)	(146)	-1.0	(144)	-2.4	(291)	(299)	2.4
JV/Associates	4	9	-57.6	(2)	nm	2	11	-85.4
EI	3	0	nm	5	-45.7	8	2	>100
PBT	600	520	15.3	558	7.5	1,158	948	22.2
Tax	(159)	(104)	-51.8	(165)	3.9	(323)	(161)	-101.4
Effective tax rate (%)	26.4	20.1	31.6	29.6	-10.6	27.9	17.0	64.8
MI	(0)	(10)	98.4	(4)	96.3	(4)	(4)	-1.4
Net profit	441	406	8.7	389	13.5	830	782	6.1
Core net profit	439	406	8.0	425	3.3	863	888	-2.8
EPS (sen)	3.7	3.5	8.1	3.3	14.4	7.0	6.7	5.1
Core EPS (sen)	3.7	3.5	8.0	3.6	3.3	7.4	7.6	-2.8
DPS (sen)	3.8	3.5	8.6	3.7	2.7	7.5	7.0	7.1

RMmil	2Q25	2Q24	YoY (%)	1Q25	QoQ (%)	1H25	1H24	YoY (%)
Service revenue	2,693	2,695	-0.1	2,653	1.5	5,346	5,383	-0.7
Consumer revenue	2,398	2,394	0.2	2,372	1.1	4,770	4,788	-0.4
Postpaid	1,079	1,039	3.8	1,068	1.0	2,147	2,072	3.6
Prepaid	1,050	1,111	-5.5	1,056	-0.6	2,106	2,232	-5.6
Wholesale & others	208	202	3.0	192	8.3	400	405	-1.2
Home & fiber	61	42	45.2	56	8.9	117	79	48.1
	0					0
Enterprise revenue	295	301	-2.0	281	5.0	576	595	-3.2
Mobile	220	233	-5.6	226	-2.7	446	466	-4.3
ICT & connectivity revenue	75	59	27.1	55	36.4	130	111	17.1
Fixed	0	9	nm	0	nm	0	18	nm
	0					0
Total cost	1,794	1,710	4.9	1,860	-3.6	3,654	3,534	3.4
COGS	812	731	11.1	853	-4.8	1,665	1,480	12.5
Cost of materials	528	496	6.5	572	-7.7	1,100	1,037	6.1
Traffic charges	284	235	20.9	281	1.1	565	443	27.5
OPEX	982	979	0.3	1,007	-2.5	1,989	2,054	-3.1
Sales and marketing	166	174	-4.6	171	-3.2	337	344	-1.9
Staff costs	175	223	-21.5	249	-29.6	424	577	-26.6
Operations and maintenance	234	232	0.9	228	2.4	462	454	1.9
Other expenses	163	162	0.6	163	0.0	326	307	6.2
USP fund and license fees	141	162	-13.0	164	-14.0	305	318	-4.1
Credit loss allowances	101	25	>100	32	>100	133	52	>100

	2Q25	2Q24	YoY (%)	1Q25	QoQ (%)
Total subscribers (‘000)	20,375	20,223	0.8	20,656	-1.4
Consumer	18,750	18,703	0.3	19,051	-1.6
Postpaid	5,946	5,618	5.8	5,871	1.3
Prepaid	12,568	12,944	-2.9	12,975	-3.1
Home & Fibre	236	141	67.4	205	15.1
Enterprise	1,625	1,520	6.9	1,605	1.2

ARPU (RM)	41	41	0.0	40	2.5
Consumer
Postpaid	60	63	-4.8	60	0.0
Prepaid	28	28	0.0	27	3.7
Home & Fibre	94	103	-8.7	96	-2.1

Source: CelcomDigi, AmInvestment Bank

EXHIBIT DATA (CHARTS NOT RENDERED)

The following exhibits contain chart data which cannot be rendered in pure HTML without images.

EXHIBIT 2: POSTPAID SUBSCRIBERS AGAINST ARPU
EXHIBIT 3: PREPAID SUBSCRIBERS AGAINST ARPU
EXHIBIT 4: HOME FIBRE SUBSCRIBERS AGAINST ARPU
EXHIBIT 5: ENTERPRISE SUBSCRIBERS

EXHIBIT 6: VALUATIONS

Target EV/Ebitda (x)	9.5x
FY26F Ebitda	RM5,959mil
ESG premium	3%
12-month target price	RM3.85

Source: AmInvestment Bank

Company profile

CelcomDigi is Malaysia’s largest mobile operator. It is the product of the merger between Celcom and Digi, which was completed in November 2022. Axiata and Norwegian based Telenor, each owns a 33.1% stake in the group. The group has a combined user base of 20mil subscribers. Historically, Celcom has been known for its extensive coverage and Digi for its cost efficiency.

Investment thesis and catalysts

Merger synergies. Assuming flattish revenues, we expect profit to be driven by merger synergies. The group is guiding for post 2027 steady state annual cost reductions of RM800mil, with savings stemming from network (RM150mil), IT (RM140mil), people (RM160mil) and other (RM350mil) costs. However, as this has been well flagged, we believe upside has been priced in.

Market consolidation. If news reports of Maxis exploring a buyout of U Mobile is true, this could lead to an industry rerating. Market consolidation would potentially result in reduced competition, creating a more stable pricing environment.

Valuation methodology

Our target price is based on a target EV/Ebitda multiple of 9.5x and CY26 Ebitda. Our multiple is the two-year average for the Malaysia mobile sector. We believe this is more relevant than the five-year average, as it better reflects the sector de-rating post 5G developments in Malaysia.

With the transition to a wholesale network model for 5G, Malaysia mobile players have undergone a sector derating, on expectations of reduced pricing power in the future and threats of increased competition.

Risk factors

There are downside risks to share price from execution, if the group is unable to deliver on promised synergies.

Competition is a risk, given mature mobile penetration rates and lower barriers to entry, following a transition to the dual 5G network model. We estimate every 1% decrease in ARPU, lowers earnings by 4%.

EXHIBIT 7: FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec)

	FY23	FY24	FY25F	FY26F	FY27F
Revenue	12,682.2	12,679.4	12,629.7	12,625.1	12,618.1
EBITDA	5,919.1	5,808.2	6,055.6	5,959.4	5,850.1
Depreciation/Amortisation	(3,230.1)	(3,263.4)	(2,976.2)	(2,851.2)	(2,752.4)
Operating income (EBIT)	2,688.9	2,544.7	3,079.4	3,108.2	3,097.7
Other income & associates	31.0	4.9
Net interest	(539.0)	(597.3)	(534.4)	(505.7)	(483.1)
Exceptional items		(217.2)
Pretax profit	2,181.0	1,735.1	2,545.0	2,602.5	2,614.6
Taxation	(614.0)	(346.4)	(610.8)	(624.6)	(627.5)
Minorities/pref dividends	(14.6)	(12.2)
Net profit	1,552.3	1,376.5	1,934.2	1,977.9	1,987.1
Core net profit	2,416.0	1,812.4	1,934.2	1,977.9	1,987.1

Balance Sheet (RMmil, YE 31 Dec)

	FY23	FY24	FY25F	FY26F	FY27F
Fixed assets	12,571.6	11,728.0	11,092.1	10,583.2	10,174.7
Intangible assets	18,950.8	18,943.0	18,916.3	18,890.1	18,864.4
Other long-term assets	1,489.0	1,542.8	1,542.8	1,542.8	1,542.8
Total non-current assets	33,011.5	32,213.7	31,551.1	31,016.1	30,581.9
Cash & equivalent	397.0	237.3	165.3	283.8	368.1
Stock	246.7	261.3	204.7	204.6	204.5
Trade debtors	2,474.4	3,148.4	2,439.1	2,438.2	2,436.8
Other current assets	297.3	214.5	214.5	214.5	214.5
Total current assets	3,415.4	3,861.5	3,023.5	3,141.1	3,223.9
Trade creditors	4,285.0	4,974.0	3,887.3	3,885.9	3,883.8
Short-term borrowings	2,227.5	1,860.3	1,818.1	1,751.8	1,698.3
Other current liabilities	909.1	194.8	194.8	194.8	194.8
Total current liabilities	7,421.7	7,029.0	5,900.3	5,832.6	5,776.9
Long-term borrowings	10,769.4	11,189.2	10,689.2	10,317.6	10,017.2
Other long-term liabilities	1,777.0	1,668.0	1,668.0	1,668.0	1,668.0
Total long-term liabilities	12,546.4	12,857.3	12,357.2	11,985.6	11,685.2
Shareholders’ funds	16,347.7	16,074.5	16,202.8	16,224.7	16,229.3
Minority interests	111.0	114.3	114.3	114.3	114.3
BV/share (RM)	1.39	1.37	1.38	1.38	1.38

Cash Flow (RMmil, YE 31 Dec)

	FY23	FY24	FY25F	FY26F	FY27F
Pretax profit	2,181.0	1,735.1	2,545.0	2,602.5	2,614.6
Depreciation/Amortisation	3,230.1	3,263.4	2,976.2	2,851.2	2,752.4
Net change in working capital	(503.4)	(1,019.5)	(320.7)	(0.4)	(0.7)
Others	175.3	(361.6)	(619.8)	(637.6)	(643.4)
Cash flow from operations	5,083.1	3,617.5	4,580.8	4,815.6	4,723.0
Capital expenditure	(1,811.7)	(2,686.7)	(1,808.4)	(1,811.2)	(1,813.5)
Net investments & sale of fixed assets	(369.8)	242.8
Others	31.9	198.5	9.0	13.0	15.9
Cash flow from investing	(2,149.5)	(2,245.4)	(1,799.5)	(1,798.1)	(1,797.6)
Debt raised/(repaid)	(2,249.8)	97.7	(1,047.4)	(942.9)	(858.6)
Equity raised/(repaid)
Dividends paid	(1,501.6)	(1,654.1)	(1,805.9)	(1,956.0)	(1,982.5)
Others	(6.4)	(10.0)
Cash flow from financing	(3,757.8)	(1,566.4)	(2,853.3)	(2,898.9)	(2,841.2)
Net cash flow	(824.3)	(194.3)	(72.0)	118.5	84.2
Net cash/(debt) b/f	1,220.8	397.0	237.3	165.3	283.8
Net cash/(debt) c/f	397.9	202.8	165.3	283.8	368.1

Key Ratios (YE 31 Dec)

	FY23	FY24	FY25F	FY26F	FY27F
Revenue growth (%)	87.2		(0.4)		(0.1)
EBITDA growth (%)	98.9	(1.9)	4.3	(1.6)	(1.8)
Pretax margin (%)	17.2	13.7	20.2	20.6	20.7
Net profit margin (%)	12.2	10.9	15.3	15.7	15.7
Interest cover (x)	5.0	4.3	5.8	6.1	6.4
Effective tax rate (%)	28.2	20.0	24.0	24.0	24.0
Dividend payout (%)	96.7	120.2	93.4	98.9	99.8
Debtors turnover (days)	70	81	81	71	71
Stock turnover (days)	6	7	7	6	6
Creditors turnover (days)	112	133	128	112	112

Source: Company, AmInvestment Bank Bhd estimates

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