KUALA LUMPUR, Feb 21 ― Kenanga Investment Bank Bhd (Kenanga IB) has revised upward its earnings forecast for CelcomDigi Bhd by 34 per cent for the financial year 2024 (FY2024) on the expectation of lower costs.

The research house also lifted CelcomDigi’s target share price by 9 per cent to RM5.83.

Kenanga IB noted that CelcomDigi’s FY2024 guidance highlighted that depreciation costs are expected to be slightly lower (by about RM100 million) given a smaller asset base following the accelerated depreciation exercise in FY2023.

The telecommunications company also signalled higher integration costs versus FY2023’s RM114 million, which will be driven by expenses to consolidate retail outlets and information technology systems, among others.

In FY2024, the research house also expects the company to achieve a low single-digit increase in service revenue, similar earnings before interest and tax growth and achieve capital expenditure “intensity” of 15-18 per cent.

“However, FY2024 guidance does not include the impact of the looming implementation of the new 5G dual network model,” Kenanga IB said in a note.

Meanwhile, Public Bank Investment Bank Bhd (Public Bank IB) raised its FY2024-FY2025 earnings forecasts for CelcomDigi by an average of 11 per cent.

It believes the group is expected to speed up its merger integration efforts after hitting 30 per cent of the exercise at the end of last year.

In 2024, it noted that CelcomDigi aims to achieve 40 per cent of the merger exercise with the remaining 30 per cent in the third year.

The process includes network integration and modernisation by consolidating 12,000 sites from Celcom and Digi into a single network of 18,000 sites.

“However, we note that this has also caused connection problems for its users as towers and networks are being consolidated, particularly in high-traffic locations.

“We expect this to be rectified over time during the integration period with minimal impact on its subscriber base,” it added.

CelcomDigi’s net profit jumped to RM435.11 million in the fourth quarter (4Q) ended Dec 31, 2023, against RM127.36 million in the same period a year earlier mainly due to lower depreciation of assets.

Revenue for the quarter increased to RM3.27 billion from RM2.18 billion previously, driven by increased device sales and service revenue.

For the full year, its net profit surged to RM1.55 billion from RM848.03 million in the previous year as revenue surged to RM12.68 billion from RM6.77 billion, mainly driven by higher device sales and higher service revenue.

At noon, the counter was the main laggard of the FBM KLCI, losing six sen to RM4.31 after yesterday’s rally that closed at RM4.37. ― Bernama