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In contrast, the research house maintained its “buy” call on Axiata Group Bhd, which it said outperformed due to stronger delivery from its core earnings divisions.
“CelcomDigi fell short of our expectations from lower service revenue for both postpaid (-1.1% year-on-year (y-o-y)) and prepaid segments (-2.1 y-o-y),” it said in a telecommunications sector report today.
AmInvest also said CDB is losing market share. “In 1H FY2024, CDB accounted for 46% of the mobile market share, ahead of Maxis’ 23% and UMobile’s 21%.
“However, CDB lost 1% of its market share as subscriber base fell to 20.2 million in 1H FY2024 from 20.5 million in 1H FY2023.”
It said this was attributed to the large decline in prepaid customers (-648,000 subscribers y-o-y) which was partly cushioned by expanded postpaid subscribers (+344,000 subscribers).
In addition, CDB’s prepaid service revenue fell by 2% y-o-y in the first half on the back of reduced subscriber base from fewer rotational one-time sim acquisitions, it noted.
It downgraded its call on CelcomDigi from “buy” to “hold” with a lower fair value of RM4 per share from RM4.40 previously on a reduction in terminal growth rate to 1% from 2.1% previously.
At the time of writing, CDB was down 4 sen or 1.1% at RM3.67, giving the group a market capitalisation of RM43.1 billion.
Last month, RHB Investment Bank flagged that investors may have overestimated the benefits from CelcomDigi’s merger synergies.
It stated that market expectations on merger synergies may be “overly optimistic” and may only materialise in 2025.
AmInvest, which maintained its neutral rating on the telecommunications sector, said the sector’s earnings eased by 1% y-o-y in the first half.
“This can be attributed to a 14% decline in CDB’s core net profit, which was pressured by flattish postpaid and prepaid revenue.
“Notably, the sector’s earnings were cushioned by Axiata’s commendable performance, underpinned by strong contributions from operating divisions, namely XL, Robi and Smart.
The research house also said it remained cautious on the sector due to high operational costs, potential regulatory setbacks, intense competition in the mobile space, and growing rivalry in the fixed broadband landscape.
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