CelcomDigi First Full Year Of Merger, Maybank IB Maintains HOLD

CelcomDigi (CDB MK) saw a stable EBIT guidance for FY24 which signalled another year of elevated integration costs and D&A.

CelcomDigi’s investment thesis revolves mainly around the merger synergies – which are significant (MYR8b NPV over 5 years) but backloaded, Maybank Investment Bank Berhad (Maybank IB) said today(Feb 22).

Maybank IB maintain HOLD with a lower DCF-based TP of MYR4.50 (-2%) as they prefer TM (T MK, BUY, CP: MYR5.90, TP: MYR6.50) in the telco space.

Results in line CelcomDigi’s 4Q23 net profit of MYR435m (+9x YoY, -5% QoQ) brings FY23 net profit to MYR1,552m (+103% YoY), 3%/5% above our/consensus forecasts respectively.

Note that YoY comparison is not representative given the impact of the merger. A 3.5sen DPS was declared for the quarter, bringing FY23 DPS to 13.2sen (+8% YoY), representing c.100% payout.

Marginal revenue growth

On a like-for-like basis, 4Q23 service revenue was up marginally by 0.9% QoQ (and 0.7% YoY), driven by growth at the postpaid (higher subscribers, lower ARPU) and wholesale segments.

Meanwhile, 4Q23 costs were higher sequentially on seasonally higher device costs and increased impairments (in relation to billing systems).

Consequently, 4Q23 EBITDA margin was 9.4ppt lower QoQ at 41.0%.

4Q23 D&A of MYR546m included c.MYR200m of writebacks following the finalisation of the purchase price allocation exercise (in relation to the merger).

Stable FY24 EBIT guidance

For FY24, management is guiding for 1) stable EBIT on low single digit service revenue growth, and 2) capex-to-sales of 15%-18%.

Maybank IB lowered their FY24/25 net profit forecasts by 25%/16% respectively to reflect updated guidance, and introduce FY26 forecasts along with their TP (DCF-based assuming 8.1% WACC and 2% LT growth) to MYR4.50 (from MYR4.60).

The management maintains that the MYR8b (NPV) worth of merger synergies remains an achievable target.

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