Investment Highlights

• As CDB’s share price has fallen 13% over the past 6 months, we upgrade our call to BUY from HOLD with an unchanged DCF-derived fair value of RM4.50/share (WACC: 7.3% & terminal growth: 2%).

• Our FV incorporates a 3% premium for the group’s unchanged 4-star ESG rating, implying FY24F EV/EBITDA of 9.6x, which is 0.5 standard deviation below its 2-year average of 11x.

• We recently attended CDB’s ESG Day 2024 in Subang Hi- Tech Industrial Park. During the event, CDB introduced its ESG strategy tagline of “Trust in the Age of Digital- Everything” underpinned by 4 pillars:
  
  i) Inclusive and Safe Digital Access,
  
  ii) Sustainable Value Chain,
  
  iii) Governance & Performance Culture, and
  
  iv) Environmental Impact and Action.

• Additionally, CDB launched the National Scam Awareness Survey 2024 report. The survey is a part of CDB’s S.A.F.E Internet Programme which aims to empower Malaysians to become responsible digital habits.

• We believe CDB benefits from site modernisation post- merger with opportunities to upgrade to greener and more efficient technologies. Currently, CDB uses energy-efficient Tri-band UBR from legacy radios. This modernisation is expected to enhance operational efficiency, reduce environmental impact and support sustainable growth.

• Digi has brought over some of Telenor’s ESG practices into CDB’s operations. As a leading telecom operator in Europe, Telenor adopted global best practices in sustainability. As a result, CDB’s ESG performance is now aligned with Telenor’s standards.

• We also had the opportunity to visit CDB’s newly launched state-of-the-art AI experience centre (AiX) – a one-stop immersive innovation and collaboration hub.

• CDB’s has collaborated with more than 40 notable global tech and local ecosystem players to accelerate the development of cutting-edge digital solutions. The investments by CDB and its partners have reached RM55mil.

• CDB is currently trading at an inexpensive FY25F EV/EBITDA 8.7x, which is below its 2-year average of 11x.

Source: AmInvest Research - 24 Jul 2024