CDB: Future Spectrum Access And Dividends Will Support Long Term Upside

Analysts have slightly revised their fair value estimate for Celcomdigi Berhad from RM3.94 to RM3.93, reflecting marginally lower assumptions for revenue growth, profit margin and future P/E, partially offset by a modestly reduced discount rate.

What's in the News

Comviva launched a next generation Digital Distribution Management System for CelcomDigi, consolidating multiple legacy systems into a single platform that supports mission critical sales and distribution processes across online, direct, and indirect channels, with integrations across roughly 300 touchpoints and tens of thousands of partners, outlets, and users (Client Announcements).
The new Unified Digital Distribution Management System, powered by Comviva's BlueMarble Retail platform, is designed as a one stop solution for inventory management, partner management, and customer service, targeting greater efficiency in CelcomDigi's sales operations and customer transactions (Client Announcements).
CelcomDigi accepted spectrum assignments from the Malaysian Communications and Multimedia Commission for 2x5 MHz in the 1,800 MHz band and 2x20 MHz in the 2,600 MHz band, effective from 30 November 2025, with price component payments of RM292.5 million and cumulative annual payments totaling RM120 million over the assignment periods (Business Expansions).
The spectrum assignments run until 30 June 2032 for the 1,800 MHz band and 30 June 2027 for the 2,600 MHz band. This provides CelcomDigi with defined access to these airwaves for network and service planning across several years (Business Expansions).
CelcomDigi declared a third interim tax exempt single tier dividend of 3.6 sen per ordinary share for the financial year ending 31 December 2025, with the shares trading ex dividend from 9 December 2025, lodgment date on 10 December 2025, and payment date on 23 December 2025 (Dividend Decreases).

Valuation Changes

The fair value estimate was trimmed slightly from MYR3.94 to MYR3.93 per share, reflecting small tweaks to underlying assumptions.
The discount rate was reduced modestly from 8.49% to 8.37%, indicating a slightly lower required return used in the model.
The revenue growth assumption eased marginally from about 1.73% to 1.72%, pointing to a very small adjustment in top line expectations.
The net profit margin was lowered a touch from about 16.94% to 16.92%, signaling a very small change in projected profitability.
The future P/E multiple was revised down slightly from 25.73x to 25.62x, implying a small change in how much is assumed investors would be willing to pay for earnings.

Network integration and modernization enhance efficiency and service quality, driving revenue growth and improved margins.
Cost synergies and value-added services boost profitability and sustain future earnings growth.
Ongoing merger-related costs and integration efforts pose financial, operational, and revenue growth risks, with sustainability hinging on successful execution of monetization and cost optimization strategies.

Catalysts

About Celcomdigi Berhad

An investment holding company, provides mobile communication services and related products in Malaysia.What are the underlying business or industry changes driving this perspective?

The completion of network integration and modernization is expected to enhance operational efficiency and service quality, likely driving revenue growth and improved net margins.
With a significant portion of merger-related one-off costs already incurred, future earnings will benefit from cost synergies and operational excellence, boosting net margins and profitability.
The expansion in Postpaid, Home & Fibre, and Enterprise Solutions represents potential for sustained revenue growth, which can positively impact future earnings.
The shift to value-added services aims to monetize the customer base, thereby increasing revenue streams and potentially enhancing net margins.
Continued investment in technology partnerships and new capabilities—while merger-related adjustments are reduced—positions the company for innovation-driven growth and improved earnings in the long term.

Celcomdigi Berhad Earnings and Revenue Growth

Celcomdigi Berhad Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Celcomdigi Berhad's revenue will grow by 1.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 11.0% today to 15.9% in 3 years time.
Analysts expect earnings to reach MYR 2.1 billion (and earnings per share of MYR 0.18) by about September 2028, up from MYR 1.4 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting MYR2.7 billion in earnings, and the most bearish expecting MYR1.7 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.0x on those 2028 earnings, down from 30.4x today. This future PE is greater than the current PE for the MY Wireless Telecom industry at 19.4x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.45%, as per the Simply Wall St company report.

Celcomdigi Berhad Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company's reported profit for 2024 was negatively impacted by significant one-off merger-related costs, which could indicate potential future financial volatility and affect net margins.
CelcomDigi is still in the process of completing integration efforts, with 30 out of 50 IT domains pending or in progress, suggesting continued operational risks that might impact future earnings stability.
Despite focusing on long-term profitable growth, the success of this strategy relies heavily on the company's ability to monetize value-added services and optimize cost structures, which poses a revenue growth risk if not executed effectively.
The company’s commitment to distribute a minimum of 80% of its PAT as dividends is contingent upon free cash flow and distributable reserves, introducing financial sustainability and cash flow risk if profit margins do not improve as expected.
A potential overreliance on technology partnerships and selective investments in new areas could lead to insufficient returns if these initiatives do not translate into increased earnings and revenue growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of MYR4.01 for Celcomdigi Berhad based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MYR5.6, and the most bearish reporting a price target of just MYR3.1.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be MYR13.4 billion, earnings will come to MYR2.1 billion, and it would be trading on a PE ratio of 28.0x, assuming you use a discount rate of 8.5%.
Given the current share price of MYR3.67, the analyst price target of MYR4.01 is 8.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Completion Of Network Integration Will Boost Operational Efficiency And Service Quality