KUALA LUMPUR: The proposed merger between Digi.Com Bhd (Digi) and Celcom Axiata Bhd (Celcom) is progressing as planned and will likely be completed in the second quarter ending June 30, 2022, subject to approvals.
MIDF Research said the merged unit would likely see the combination of both telco groups' scale, experience, and financial strength in supporting MyDigital aspiration.
"Potential downside risks are weaker-than-expected earnings, intense mobile competition and termination on the proposed merger with Celcom," the firm said in a note today.
On that note, MIDF Research raises Digi.Com Bhd's revenue for the financial year (FY22) by 2.1 per cent while FY22 and FY23 earnings forecasts by 7.7 per cent and 7.5 per cent, respectively.
The revised target price premised on pegging FY22 earnings per share of 17.8 sen against Digi's two-year price-earnings ratio average of 24.9 times.
The research firm maintains a Neutral call on Digi with a revised target price of RM4.43.
"Our new forecasts factored in the merger synergy expectation of RM500 million from operational expenditure and capital expenditure savings," MIDF noted.
Hong Leong Investment Bank Bhd (HLIB Research) also maintained a Hold call for Digi with an unchanged target price of RM4.00.
"We see a long recovery journey ahead as the free 1GB daily quota will erode its data monetisation opportunity.
"While waiting for more clarity on the merger and 5G special purpose vehicle (SPV), dividend yield of 3.3 per cent should sustain share price in the near term."
Digi net profit fell 2.5 per cent to RM312.82 million in the third quarter (Q3) ended September 30 2021, from RM320.76 million a year earlier despite a rise in its revenue.
In an exchange filing yesterday, the telecommunication services provider said the group revenue rose slightly to RM1.584 billion from RM1.579 billion a year earlier.
In the quarter under review, Digi said its service revenue of RM1.343 million returned to a sequential growth of 0.2 per cent.
This was underpinned by improvements in postpaid and core prepaid revenues as the total subscriber base strengthened to 10.37 million coupled with a resilient blended average revenue per use (ARPU).
