Celcomdigi Berhad (CDB): A Dividend Growth Story in Malaysia's Telecommunications Sector

Malaysia's telecommunications sector has long been a battleground for market consolidation and operational efficiency. Yet, (CDB) stands out as a beacon of resilience, with its recent dividend increase to MYR0.038 per share signaling a strategic shift toward sustainable shareholder returns. This move, coupled with improving earnings and disciplined cash flow management, positions CDB as a compelling case study in value creation within a maturing industry.

Financial Fortitude: Earnings and Cash Flow Underpin Dividend Growth

Celcomdigi's Q2 2025 results underscore its ability to balance growth with prudence. Revenue rose 2.3% year-over-year to MYR3.178 billion, driven by robust performance in the Postpaid and Home & Fibre segments. EBIT surged 12.3% to MYR736 million, while PAT (Profit After Tax) grew 5.5% to MYR439 million. These figures reflect disciplined capital expenditure and the realization of merger synergies from the Celcom-Digi integration.

The dividend increase to 3.8 sen per share—a 8.6% year-on-year jump—was funded by strong operating cash flow. For FY2025, operating cash flow is projected at MYR4.417 billion, with net cash inflow of MYR802.2 million. This liquidity allows CDB to allocate MYR1.8 billion to dividends while maintaining a healthy cash balance of MYR1.006 billion. The payout ratio of 102% for Q2 2025, though high, is supported by cost savings from integration initiatives, which are expected to deliver RM700–800 million in annualised savings post-2027.

Strategic Transformation: Fueling Long-Term Value

CDB's dividend sustainability is not just a function of earnings but also its strategic reinvention. The company has completed 84% of its network integration and modernisation, enhancing service quality and data usage (38GB per user). Its IT consolidation program, nearing full operationalisation by Q4 2026, has streamlined billing systems and reduced redundancies.

Retail transformation further amplifies CDB's competitive edge. Nearly 60 digital-concept stores and two flagship “Life” stores (partnered with Samsung and Disney) have boosted sales productivity. These initiatives, coupled with -driven customer service innovations, have earned CDB accolades like at the Retail Asia Awards. Such investments are not merely operational—they are value-creating, as they deepen customer engagement and drive recurring revenue.

Risks and Rewards in a Consolidating Industry

While CDB's financials are robust, the telecom sector remains competitive. Prepaid revenue dipped due to IT rationalisation and a strategic shift away from low-margin rotational SIMs. However, Postpaid and Home & Fibre growth—3.8% and 45.2% YoY, respectively—offset these challenges. The Enterprise Solutions segment, up 10.3% YoY, also highlights CDB's diversification into higher-margin services like cybersecurity and connectivity.

Investors should also consider macroeconomic risks, such as inflationary pressures and regulatory changes. Yet, CDB's leverage profile—net debt-to-equity projected to decline from 79.1% in 2024 to 69.2% by 2027—provides a buffer. Its interest cover of 3.9x for FY2025F further underscores financial stability.

Investment Implications: A Dividend Growth Play

CDB's dividend trajectory—from 3.5 sen in Q1 2024 to 3.8 sen in Q2 2025—reflects a disciplined approach to capital allocation. With a forward dividend yield of ~5% and a payout ratio aligned with earnings growth, the stock offers a compelling income stream. For long-term investors, the company's focus on cost savings, digital innovation, and high-value customer segments suggests dividends will remain resilient.

However, the stock's valuation must be scrutinised. At a price-to-earnings (P/E) ratio of ~12x (as of August 2025), CDB trades at a discount to regional peers, reflecting its integration costs and sector volatility. Yet, with projecting a 19% upside in share price, the risk-reward balance appears favorable for those seeking a blend of income and growth.

Conclusion: A Model for Sustainable Dividend Growth

Celcomdigi Berhad's recent dividend increase is more than a payout—it is a testament to its operational discipline and strategic foresight. By leveraging synergies, investing in digital transformation, and maintaining a conservative balance sheet, CDB has created a framework for sustainable shareholder returns. In a sector where consolidation is the norm, CDB's ability to grow dividends while navigating challenges makes it a standout play for income-focused investors.

For those willing to ride the wave of Malaysia's digital evolution, Celcomdigi offers a rare combination of stability and growth—a dividend growth story with staying power.