Photo by Zahid Izzani/The Edge

KUALA LUMPUR (May 29): Shares in CelcomDigi Bhd (KL:CDB) extended their decline to the lowest in over 15 months after the country’s largest mobile carrier by subscribers reported weaker-than-expected quarterly results.

CelcomDigi slipped 3.5% to RM3.86 a share at Wednesday’s close, its lowest since Jan 4, 2023, after more than 5.52 million shares changed hands. At its current price, the group is valued at RM45.3 billion.

Net profit for the three months ended March 31, 2024 (1QFY2024) only accounted for 18% of consensus full-year forecast. When non-operating items are excluded, its core net profit of RM405.1 million only made up 20% of the estimates, said Public Investment Bank (Public IB), while maintaining the stock on a “neutral” call.

Analysts are broadly cautious about the counter’s performance. A large majority of 12 out of institutional analysts covering the stock this month have CelcomDigi on a “hold” call, while one has a “sell” rating on it, and four have “buy” recommendations, according to Bloomberg.

The consensus average 12-month target price is RM4.47, representing a potential upside of 12.6% from its current price.

Maybank Investment Bank opined that the merger synergies are significant but back-loaded with a net present value of RM8 billion over five years.

The research house expects CelcomDigi to report a low single-digit service revenue growth for FY2024, and prefers Axiata Group Bhd (KL:AXIATA) within the telco space.

CelcomDigi said it has completed 44% of its nationwide network integration and modernisation programme ahead of its schedule in 2024. The programme is a three-year initiative which involves the consolidation of Celcom and Digi sites into a single network of 18,000 sites.

Public IB said the initiative had caused connection problems for its users, particularly in high-traffic locations. Nevertheless, it expects the issue to be rectified over time, “with minimal impact on its subscriber base”.

Meanwhile, MIDF Amanah Investment Bank maintained its “buy” call on the counter, amid optimism in the group’s continuous delivery of the targeted synergies and operational excellence.

“In the coming quarters, we would expect the service revenue to play a catch-up role, premised on the new mobile proposition, coupled with its convergence strategy,” it said in a research note.

On Tuesday (May 28), CelcomDigi said its net profit rose 18% year-on-year (y-o-y) to RM376.46 million, from RM317.92 million in the first quarter ended March 31, 2024 (1QFY2024), attributable to provision writeback.

The company reversed an over-recognition of tax provision amounting to RM51.43 million during the quarter.

Revenue slipped 0.8% to RM3.15 billion from RM3.18 billion, due to lower interconnect rate, reduced bulk messaging traffic, and overall softer usages.

The mobile carrier declared a dividend of 3.5 sen per share for the quarter.

“While waiting for more clarity on industry 5G structure and its strategy ahead, a dividend yield of 4% should sustain share price in the near term,” said Hong Leong Investment Bank.