Broker: UOB Kay Hian
Date of Report: Tuesday, 19 August 2025
CelcomDigi Berhad (CDB MK) 2Q25 Earnings Review: Solid Performance Despite Prepaid Weakness, Dividend Upside for Investors

Overview: Malaysia’s Mobile Giant Shows Resilience Amidst Headwinds

CelcomDigi Berhad, a leading Malaysian mobile operator offering 2G, 3G, and 4G services, has released its 2Q25 results, presenting a robust operational outlook despite short-term challenges. UOB Kay Hian maintains a BUY recommendation, with a DCF-based target price of RM4.30, indicating a potential upside of 19% from the current RM3.78 share price.

Key Takeaways for Investors

• Current Share Price: RM3.78
• Target Price: RM4.30 (+19.0% Upside)
• Market Cap: RM44.3 billion
• Dividend Yield: Estimated at 5% for FY25
• Major Shareholders: Telenor ASA (33.1%), Axiata Group Bhd (33.1%), EPF (10.7%)

2Q25 Financial Highlights: Margins Improve, Prepaid Segment Weighs

CelcomDigi reported a core net profit of RM439 million for 2Q25, up 7% YoY and 2% QoQ. Strength from enterprise, home, and fibre segments, combined with ongoing cost savings, offset weakness in prepaid revenues and higher provisions for doubtful debts.

Cost Structure and Profitability Trends

• Direct Expenses: 25.5% of revenue in 2Q25, down from 26.6% in 1Q25
• S&M Expenses: Slightly increased to 5.4%
• Staff Cost: Dropped to 5.5% from 7.7% in 1Q25
• Bad Debts: Rose sharply to 3.2% reflecting higher contracted base
• G&A and Others: 16.8% of revenue

Dividend: Record Payout Signals Strong Shareholder Commitment

CelcomDigi declared a second interim net dividend per share (DPS) of 3.8 sen, representing a 102% payout—the highest since the merger. The full-year estimate stands at 17.3 sen (100% payout), equating to a projected 5% dividend yield.

Key Financials and Forward Outlook

Segment Analysis: Postpaid, Prepaid, Home & Fibre

Postpaid Segment: Growth Driven by Family Plans

• Consumer postpaid revenue climbed 4% YoY to RM1,079 million (+1% QoQ).
• Net subscriber adds: +328,000 YoY; +107,000 QoQ (2Q25).
• Stable ARPU at RM60/month, supported by family plan penetration.
• Outlook: Slight ARPU dilution expected, but higher customer stickiness and ARPA to offset.

Prepaid Segment: Declining Revenues, System Optimization Underway

• Consumer prepaid revenue fell 6% YoY and 1% QoQ to RM1,050 million.
• ARPU up slightly to RM28/month (from RM27/month in 1Q25).
• Net adds dropped sharply to 12,568 in 2Q25 (-376,000 YoY, -407,000 QoQ) due to internal system optimization.
• Expectation: More resilient revenue, stronger retention, and improved ARPU ahead.

Home and Fibre: Strong Expansion Continues

• Net adds: +95,000 YoY; +31,000 QoQ.
• Revenue base: RM61 million (+45% YoY, +9% QoQ).
• ARPU moderated to RM94/month (down from RM103/month YoY).
• Growth driven by CelcomDigi One convergence plans and FWA penetration.

Synergy, Capex, and Outlook: Investing for Long-Term Value

• 1H25 EBIT up 16.5% YoY to RM1.4 billion, aided by lower D&A and RM95 million in net synergistic savings.
• Core net profit for 1H25 fell 2% YoY to RM869 million due to higher tax expense.
• Capex intensity set to rise to 14-16% of revenue in 2H25, with major IT integration costs expected.
• Ongoing cost rationalisation and manpower restructuring to deliver benefits and offset D&A pressure.
• Synergistic cost savings target: RM700-800 million annually beyond 2027.

ESG Initiatives: Driving Sustainability and Social Impact

Environmental

• Net Zero 2050 roadmap development and SBTi-aligned targets set for 2025.
• Migration to cloud-based data centres to reduce carbon footprint.
• Energy optimization through efficient hardware and legacy network retirement.

Social

• 100% employee pass-rate in integrity assessments (2024).
• Active digital inclusion, entrepreneurship, and skills programs.
• Support for government JENDELA commitments and underserved communities via NaDi internet centres.

Governance

• 100% completion of cybersecurity, safety, compliance, and ethics training (2024).
• Women in leadership: 37% in 2024, targeting 40% by 2028.

Performance Guidance for 2025: Focus on Growth and Integration

• Service Revenue: Low single-digit growth anticipated.
• EBIT: Low to mid-single digit growth expected.
• Capex Intensity: 14-16% of total revenue, aimed at enhancing IT platforms.

Balance Sheet, Cash Flow, and Leverage

Cash Flow Summary

• Operating cash flow in 2025F: RM4,417.9 million
• Net cash inflow: RM802.2 million (2025F)
• Dividend payments: RM1,800.8 million (2025F)
• Ending cash and equivalents: RM1,006.1 million (2025F)

Valuation: Attractive Upside, Resilient Fundamentals

• CelcomDigi trades at a mean EV/EBITDA of 10.5x at the target price.
• Continued commitment to cost savings, IT integration, and dividend payout.
• Consensus net profit for FY25: RM1,847 million (UOBKH estimate: RM1,804 million).
• Maintain BUY rating, as CelcomDigi remains well-positioned for sustainable growth and shareholder returns.

Conclusion: Why CelcomDigi Remains a Top Pick for Malaysian Telecom Investors

CelcomDigi’s 2Q25 results highlight the company’s resilience and adaptability—delivering steady growth in postpaid, home, and fibre segments, while navigating prepaid headwinds and IT integration costs. The company’s focus on synergy, operational efficiency, and ESG commitments further strengthens its investment case. With a robust dividend yield, strong cost management, and clear forward guidance, CelcomDigi stands out as a compelling choice for investors seeking exposure to Malaysia’s dynamic telecom sector.