Sector: Telecommunications & Media | Telecommunications Service Providers
Previous Rating: BUY
Revised Target Price: RM3.53 (Previous: RM4.43)
CelcomDigi: Key Highlights
Downgrade to NEUTRAL
• Rating revised post 3QFY24 results, with a lower target price of RM3.53, reflecting near-term revenue challenges and cost pressures.
3QFY24 Performance Overview
• Normalized earnings declined 23.5% YoY to RM400m, impacted by higher costs of sales and operating expenses.
Quarterly revenue marginally improved to RM3.1 billion (+0.7% YoY), but increased material costs (+13.5% YoY to RM721.7m) and flat operating expenses (~RM900m) reduced profit margins to 13.1%.
Year-to-Date Results
9MFY24 normalized earnings grew +9.2% YoY to RM1,188m, but this was below expectations, constituting only 60% of full-year FY24 estimates. Revenue remained stagnant at RM9.4 billion, with elevated costs and weak growth in service revenue.
Prepaid and enterprise segments underperformed, offsetting modest gains in postpaid and home fiber.
Challenging Outlook
Revenue pressure persists due to SIM consolidation and weaker enterprise contributions. Cost savings from the merger are expected to materialize only by 2026, with limited near-term improvements.
Revised Earnings Estimates
• FY24-FY26 earnings forecasts reduced by 6.1% to 13.2%, factoring slower service revenue growth and lower profit margins.
Target Price Adjustment
DCF-derived target price lowered to RM3.53 (from RM4.43). Terminal growth reduced to 1% to reflect subdued near-term prospects.
Return Statistics (as of 18 Nov 2024):
• Price: RM3.37
• Expected Share Price Return: +4.7%
• Dividend Yield: +3.3%
• Total Return: +8.0%
In summary, while CelcomDigi reported marginal revenue growth, higher costs and weaker contributions from key segments have weighed on earnings. The benefits of merger-driven efficiencies remain distant, warranting a cautious outlook and a revised target price.
Read more Business News
Leave a Reply
You must be logged in to post a comment.