CelcomDigi Berhad - Higher Profit On Lower Depreciation Cost

Date: 
2024-02-21
Firm: 
PUBLIC BANK
Stock: 
Price Target: 
4.15
Price Call: 
HOLD
Last Price: 
4.08
Upside/Downside: 
+0.07 (1.72%)

CelcomDigi Bhd (CDB) reported a 4.5% QoQ drop in 4QFY23 headline net profit, mainly due to higher tax cost. However, after stripping out non-operating items such as net loss on fixed assets written off and other allowances, core net profit for 4QFY23 improved by 17.1% QoQ on the back of lower depreciation charges. For full-year FY23, results surpassed market as well as our expectations, accounting for 117% and 119% respectively. This was largely due to lower-than-expected operating and depreciation costs. As such, we raise our FY24-25F earnings forecasts by an average of 11% to factor in lower costs. Our TP, which is based on 9.5x EV/EBITDA, is revised to RM4.15. Maintain Neutral. A fourth interim dividend of 3.5sen per share was declared, bringing FY23 total DPS to 13.2sen (FY22: 12.2sen).

  • 4QFY23 revenue increased by 5.5% QoQ. Service revenue improved marginally by almost 1% as postpaid revenue was higher on a slight uptick in subscriber base (+1.1% QoQ). Prepaid revenue was flat while wholesale and home fibre business saw a 4% increase but the overall contribution to group’s revenue remained low at only 10%. For the current quarter, total subscriber base for home fibre stood at 131k, rising by 8.3% QoQ. Meanwhile, device sales and other revenue rose 37.2% QoQ to RM538m.
  • 4QFY23 core net profit improved by 17.1% QoQ to RM571.4m. Operating expenses fell 3% due to lower other expenses, while sales & marketing, staff, operation & maintenance costs were higher. Depreciation cost reported the largest decline, -37.4% QoQ to RM546m. EBITDA margin was lower at 48.8% compared to 50.5% in the previous quarter.
  • Integration in progress. The group is expected to speed up its merger integration efforts after hitting 30% at the end of last year. In 2024, it aims to achieve 40% with the remaining 30% in the third year. The process includes network integration and modernization by consolidating 12,000 sites from Celcom and Digi into a single network of 18,000 sites. However, we note that this has also caused connection problems for its users as towers and network are being consolidated, particularly in hightraffic locations. We expect this to be rectified over time during the integration period with minimal impact on its subscriber base.

Source: PublicInvest Research - 21 Feb 2024

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