CIMB Investment Bank Bhd (CIMB Securities) has maintained an OVERWEIGHT call on the telecommunications sector, citing steady earnings in the fourth quarter of 2024, with CelcomDigi Bhd emerging as the top pick. The research house highlighted that while all major telcos reported earnings in line with expectations, dividend payouts exceeded forecasts, with Time dotCom Bhd (Time) and Telekom Malaysia Bhd (TM) delivering special dividends.

CIMB noted that CelcomDigi's core earnings per share (EPS) remained flat quarter-on-quarter (QoQ) but registered a 16% year-on-year (YoY) increase, driven by higher revenue despite a rise in operational costs. TM, however, saw a 19% QoQ and 10% YoY decline in core EPS, impacted by a one-off cost of living allowance (COLA) for its employees. Maxis Bhd's core EPS also fell by 14% QoQ and 12% YoY due to seasonal device costs and higher expenses. Time stood out as the only telco to report an increase in core EPS, rising 15% QoQ and 21% YoY, supported by revenue growth and improved margins.

In terms of dividend payouts, TM and Time outperformed expectations, declaring higher-than-anticipated dividends per share (DPS) at 18.5 sen and 37.9 sen, respectively. CelcomDigi and Maxis also declared slightly higher DPS than projected by CIMB and market consensus. Looking ahead, CelcomDigi's guidance for financial year 2025 (FY25) EBIT growth was deemed disappointing, while Maxis and TM's projections aligned with market expectations.

The research firm highlighted that industry-wide mobile service revenue remained stable YoY, growing 0.8% QoQ in 4Q24, while fixed services revenue outpaced it with a 2.7% YoY increase and a 4.5% QoQ rise. Market shares remained unchanged, with Maxis holding a 41.3% revenue market share (RMS) and CelcomDigi at 58.7%, marking the first quarter since the second quarter of 2023 that CelcomDigi did not lose market share.

In the fibre broadband segment, competition remained intense. CelcomDigi led in subscriber growth, with net additions increasing by 25,000 QoQ, a 14% surge. TM's Unifi saw a milder increase of 15,000 new subscribers, while Maxis added 7,000. Fibre broadband average revenue per user (ARPU) was largely stable across all telcos, except for TM, which recorded a 3.1% QoQ and 1.5% YoY increase, attributed to greater adoption of convergence services such as mobile and TV packages. Household fibre penetration reached 45.9% by the end of 2024, suggesting room for further growth.

Despite CIMB's downward revision of its earnings forecast following the 4Q24 results, the research house still expects CelcomDigi to record the highest core EPS growth in FY25, projected at 12% YoY, driven by cost synergies. Time is forecast to achieve a 7% YoY increase, supported by retail and fibre lease revenue growth alongside improving margins.

Meanwhile, TM's core EPS is expected to remain largely flat, excluding the one-off COLA impact, as voice services continue to decline and internet revenue stagnates. Maxis is also projected to see flat core EPS growth, with low single-digit service revenue gains offset by rising 5G wholesale fees.

On the dividend front, Maxis is expected to offer the highest yield in FY25 at 5.3% based on a 94% payout ratio, followed by Time at 4.9% (100% payout), CelcomDigi at 4.5% (95% payout), and TM at 3.9% (60% payout). CIMB reiterated its 'Overweight' stance on the sector, cautioning that downside risks include regulatory changes and heightened competition.