CelcomDigi Berhad continues to demonstrate positive momentum as it advances with its integration efforts following the merger between Celcom and Digi. The company's second-quarter results for 2024 (2Q24) were in line with expectations, reflecting steady earnings growth and strategic progress.

Analysts have reiterated their 'BUY' recommendation for CelcomDigi, maintaining a target price of RM4.50. This optimistic outlook is based on the anticipated benefits of the merger synergies, expected to become more significant from FY25 onwards. Additionally, the risks associated with the developments surrounding the second 5G network appear to be largely priced in, offering a more favourable outlook for the stock.

Malaysia's largest mobile operator reported a net profit of RM406 million for 2Q24, marking an 18% year-on-year increase and an 8% quarter-on-quarter rise. The company's 1H24 net profit totalled RM782 million, representing 49% of [Investment Bank]'s full-year forecast and 40% of consensus estimates. This solid performance was primarily driven by a reduction in operating expenses (opex), although this was partially offset by higher taxes.

The company also declared a dividend of 3.5 sen per share for the quarter, maintaining a payout ratio of approximately 100%, consistent with the previous quarter.

Service revenue for 2Q24 saw a slight increase of 0.3% quarter-on-quarter, despite a 0.4% decline year-on-year. This growth was largely attributed to the postpaid segment, which benefitted from an increase in both average subscribers and average revenue per user (ARPU). Conversely, the prepaid segment faced challenges, with a decline in average subscribers, although ARPU remained stable.

On the cost side, CelcomDigi reported lower sequential expenses due to reduced device and staff costs, following the voluntary separation scheme (VSS) costs booked in 1Q24. This led to an improved EBITDA margin, which rose by 3.2 percentage points quarter-on-quarter to 45.3%.

The company's network integration is progressing ahead of schedule, with over half of the targeted sites already completed within a year, which was initially expected to be a three-year exercise. Furthermore, CelcomDigi has submitted a proposal to build a second 5G network, indicating its readiness to expand its infrastructure capabilities.