Maybank Investment Bank (Maybank), in its Malaysia Company Update today (June 28), highlighted a positive shift in CelcomDigi’s (CDB) risk-reward profile, driven by a recent share price decline and progress towards establishing Malaysia’s second 5G network.
Maybank noted that the risk associated with 5G capital expenditure appeared to be priced in, following the more than 15% drop in CDB’s share price over the past three months. This decline, equating to a loss of over RM 8 billion in equity value, is seen as sufficient to cover potential participation costs in a second 5G network consortium.
Maybank emphasised the significant merger synergies anticipated for CDB, valued at approximately RM 8 billion NPV over five years, though these benefits are expected to be more pronounced from FY25 onwards. The integration process is ongoing, with management likely to guide FY25 synergies during the 4Q24 results briefing in February 2025.
Maybank maintained its earnings forecasts and a DCF-based target price of RM 4.50 for CDB, assuming an 8.1% WACC and 2% long-term growth. The initiation of the process to split telcos’ 5G participation into Entities A or B is expected soon, with major mobile telcos expressing willingness to participate in the second 5G network.
Maybank’s analysis suggests that CDB is well-positioned for future growth, making the current share price an attractive entry point for investors. The anticipated merger synergies and participation in the second 5G network are key factors supporting this outlook.
