CelcomDigi is now a 'buy' with ‘inexpensive’ valuations, AmInvestment says

KUALA LUMPUR (July 24): CelcomDigi Bhd (KL:CDB) is now a ‘buy’ as valuation is cheap following a 13% decline in the stock’s price over the past six months, said AmInvestment Bank.

AmInvestment joins a growing list of research houses which have switched their call on CelcomDigi to ‘buy’. CIMB Securities upgraded the stock earlier this month and TA Securities lifted its recommendations in May.

CelcomDigi is trading at under nine times its forward enterprise multiple, which is “inexpensive” versus its two-year average of 11 times, AmInvestment Bank said. The research house has a target price of RM4.50, which implies nearly 10 times the firm’s value to its operating earnings.

Shares of CelcomDigi have declined about 8.8% so far this year as the largest Malaysian mobile network operator by subscribers grapple with quarterly results that came in below market expectations. Softer overall usages have dragged on service revenue despite an enlarged subscriber base.

Following AmInvestment’s upgrade, CelcomDigi now has nine ‘buy’, 14 ‘hold’, and one ‘sell’ calls. The consensus’ 12-month target price is RM4.49, a potential return of 21% from its last price of RM3.72, according to Bloomberg. At current price, CelcomDigi has a market capitalisation of RM43.64 billion.

CelcomDigi’s prospects are positive in the long term, the research house said. The company has a competitive advantage with substantial spectrum holdings of 125 megahertz compared to 115 megahertz held by its closest competitor Maxis Bhd (KL:MAXIS), AmInvestment noted.

Further, CelcomDigi is also expected to enjoy cost savings from “a streamlined network and the elimination of duplicate IT organisational costs,” it added.

CelcomDigi said in May that it has completed 44% of the 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 following their merger.