KUALA LUMPUR: CIMB Securities Sdn Bhd projects CelcomDigi Bhd's core earnings per share (EPS) to drop eight per cent in the financial year 2024 (FY24) before rising 19 per cent and 17 per cent in FY25 and FY26, respectively.
The forecasts were driven by the firm's estimated net operating expenditure synergies of -RM116 million, RM260 million, and RM558 million in FY24, FY25, and FY26.
"Besides, we see a five per cent drop in depreciation and amortisation from RM2.8 billion in FY24 to RM2.7 billion in FY26. This will be led by lower capitalised capex from a peak of RM1.9 billion in FY24 to RM1.4 billion and RM0.9 billion in FY25 and FY26 as network integration is completed by 1H25 and 4G capex is gradually scaled down," it said in a note.
The research firm forecasted a dividend per share of 18 and 22.3 sen for FY25 and FY26, offering yields of 4.9 per cent 6.0 per cent respectively.
"Downside risk to our FY24-26F core EPS forecast could stem from higher-than-expected 5G wholesale fees.
"Currently, we have factored in RM123 million, RM220 million, and RM303 million in FY24F/25F/26F, assuming 45-65 per cent 5G device penetration and 40-50 per cent of total traffic is on DNB's 5G network (balance on 4G network).
"We think this may be realistic as our 5G wholesale fee forecast for CelcomDigi totals to RM5.7 billion over FY24F-33F. Together with wholesale fees from other Digital Nasional Bhd (DNB) shareholders and Entity B (assuming RM2 billion), as well as total equity investment of RM2.2 billion DNB would have total resources of RM12.7 billion," it said.
CIMB maintained a "buy" call on the stock with a target price of RM4.30.
The firm said CelcomDigi's staff cost is expected to rise 11 per cent year-on-year (YoY) in FY24 to RM997 million due to a RM139 million voluntary separation scheme (VSS) charge in the first quarter of 2024 (Q1 2024).
Meanwhile, it said that the operations and maintenance (O&M) cost is expected to decline by five per cent, seven per cent and nine per cent YoY in FY24, FY25, and FY26, respectively, mainly due to power and maintenance cost savings from the decommissioning of 6,000 to 8,000 duplicate sites (25-30 per cent of total) by 1H25.