KUALA LUMPUR (Feb 10): CelcomDigi Bhd (CDB) will likely report flat quarter-on-quarter earnings for 4QFY2024, amid steady progress on cost synergies and subscriber stabilisation, according to CIMB Securities.

The house expects a core net profit of RM538 million, translating to a 12%–15% year-on-year (y-o-y) increase, but potentially flat compared to the previous quarter. The full-year results should remain within expectations, aligning with consensus forecasts.

“... we think 4QFY2024 core net profit could end up being roughly flat q-o-q (quarter-on-quarter)(up 12%–15% y-o-y). 

“While gross synergies should further rise q-o-q in 4QFY2024F (forecast)(on savings from voluntary separation scheme and removal of overlapping cell sites/retail stores), this could be largely offset by a normalisation of other expenses, which was abnormally low in 3Q2024, owing to reversals for over-accrual of site rental in 1H2024,” the house said in a note on Monday.

Meanwhile, CelcomDigi is seeing signs of stability in its prepaid subscriber base following recent pricing adjustments, while its postpaid segment continues to gain traction, said the house. 

“In terms of network integration and modernisation, we think CDB is likely to have met its target of 75% completion by end-FY2024, which should put it on track for full completion by mid-FY2025, in our view.”

These developments represent the group’s post-merger strategy to strengthen its market position, and to enhance service quality amid intensifying competition.

Service revenue is likely to hold steady or experience a slight uptick q-o-q, though annual comparisons suggest a 1%–2% decline. 

While cost reductions from voluntary separation schemes and network optimisations continue, these savings are largely offset by the normalisation of prior period expense reversals, and seasonally higher device costs.

The research house cites the expected resolution of Digital Nasional Bhd’s shareholding within the next six months, and the forecasted 17%–18% earnings per share (EPS) growth over FY2025F–FY2026F as key catalysts for growth.

However, risks remain with potential regulatory changes and unexpected cost increases, particularly related to 5G wholesale fees, which could weigh on future profitability. 

CIMB maintains its “buy” rating with a target price of RM4.20, citing attractive valuation levels. At the time of writing on Monday, shares of CelcomDigi were trading at RM3.82, valuing the company at RM44.8 billion.