• Maintain BUY (TP: RM4.84). CelcomDigi (CDB)'s 6MFY24 revenue wasstable at RM6.3bn, in line with our expectations, accounting for 46.9%.Earnings rose by 17.5% YoY, supported by lower tax expenses due toprovisions for the Green Tax incentive and deferred tax liabilityadjustments. Excluding the RM139m cost for the Voluntary Separation Scheme (VSS) incurred in the previous quarter, CDB’s core net profit wasRM926mn, broadly in line with our estimates (43.4%) and consensusexpectations (47.1%). We deem the earnings in line, as we anticipate further synergy gains, driven by stronger opex synergies in the comingquarter. The group declared a second interim dividend of 3.5 sen perordinary share, bringing cumulative 6MFY24 DPS to 7.0 sen (6.4 sen in 6MFY23). We maintain our BUY call on CDB with an unchanged TP of RM4.84, based on DCF valuation with a WACC of 6.3% and a long-term growth rate of 2.0%.
   
• Key highlights. Looking at CDB's subscriber numbers, the total subscriberbase declined by 1.2% YoY in 2QFY24. Zooming in, prepaid subscribersdecreased by 4.8% YoY in 2QFY24 to 12.9mn, with revenue declining by2.9% YoY, impacted by a reduced subscriber base due to fewer one-timeSIM acquisitions. On the other hand, postpaid subscribers grew by 5.1%YoY in 2QFY24, reaching 7.1mn, driven by strong uptake from attractivepackages and competitive pricing. Postpaid revenue saw a slight increaseof 0.4% YoY, supported by an expanding subscriber base.

• Earnings Revision. No change to our forecast.

• Outlook. In terms of network integration, CDB has made significantprogress, surpassing 50% of its nationwide upgrade target within a year,with over 8,500 sites modernized by the end of July 2024. At this pace,CelcomDigi is on track to complete 75% of the network upgrades by theend of 2024. We believe CDB's prospects are positive as these synergiesmaterialize, and we anticipate stronger earnings performance in thecoming quarters.

Source: BIMB Securities Research - 19 Aug 2024