Shares of Axiata Group Bhd and Digi.Com Bhd were among the highest gains during the morning trading session on Bursa Malaysia today after investors received a good report on the proposed merger of the operations of Celcom Axiata Bhd's mobile telecommunications network and Digi.Com.
Digi shares jumped to an eight -month high of 65 sen or 17.33% to RM4.40 while Axiata gained 37 sen or 9.74% to RM4.17.
At 10.21am, Digi reached RM4.26 but still showed an increase of 51 sen or 13.6% with 27.73 million shares changing hands.
Meanwhile, Axiata reached RM4.10, up 30 sen or 7.89% with 14.76 million shares changing hands.
Analysts are positive about the merger as it will increase competitiveness for Celcom and Digi. Analysts also see that the deal will be able to be signed and Digi will get more profit from the deal.
According to Affin Hwang Capital analyst Isaac Chow, in a post today, he was positive about the proposed merger and agreed with Axiata and Digi management that the merger should generate business synergies through enlarged scale, capital expenditure savings (capex) or turnover and cost optimization.
"We see a high probability that the merger will become a reality and therefore, we have raised our target price for Digi to RM4.60 and Axiata to RM4," he said.
Chow also increased the recommendation for Digi to ‘buy’ from the previous ‘hold’ but maintained the ‘hold’ recommendation for Axiata.
Meanwhile, Ta Securities analyst Wilson Loo said he viewed the proposed merger as positive news for the telecommunications industry as the merger would reduce competitive pressures in the mature Malaysian mobile market.
He also believes with the improvement in terms of service quality from Digi and Celcom, both parties will at least be able to maintain their market share.
Loo maintained a ‘buy’ recommendation on Axiata and Digi with target prices of RM4.63 and RM4.10.
