AXIATA (6888) : Axiata Group - Dancing to a Bangladeshi Beat
Target RM7.20 (Stock Rating: HOLD)
Axiata’s briefing on Robi reaffirmed our optimistic view on its growth prospects. We raise our FY14/15/16 net profit estimates for Robi by 9.4%/6.5%/11.4%. However, this translates into smaller upward revisions of 0.6%/1.0%/1.4% for Axiata Group’s net profit, as Robi only makes up 6-7% of group net profit. No change to our Hold rating but we raise our SOP-based target price slightly to RM7.20. Although we expect earnings recovery in FY15, we believe that the market has priced this into Axiata’s current valuations. For ASEAN telcos, we prefer Telkom Indonesia, SingTel and Thaicom.
What Happened
Axiata hosted an investor/analyst briefing on Friday, during which the CEO and CFO of 91.6%-owned Robi Axiata Ltd (Robi) shared their views on the telecom industry prospects and regulatory landscape in Bangladesh, as well as the company’s strategy and targets. Key points: a) there is significant room for future growth, given the user penetration of less than 50%, b) Robi aims to be a strong No.2 player, expanding its share of market revenue from 25% in 2014 to 30% by 2016, c) capex/sales will remain high this year due to the continued 3G network rollout but is expected to fall below 20% in 2016-17, d) the regulatory landscape is challenging but stabilising and beginning to improve. The key risks are imposition of new taxes, high spectrum prices and market competition.
What We Think
The briefing reaffirmed our optimistic view on Robi’s growth prospects. We raise our FY14/15/16 net profit forecasts for Robi by 9.4%/6.5%/11.4%, factoring in lower effective tax rates and decline in net interest expenses post-2015, when capex intensity falls. At the Axiata group level, the revision boosts our FY14/15/16 net profit forecasts by 0.6%/1.0%/1.4%, as Robi only accounts for 6-7% of group net profit. We also raise our SOP-based target price for Axiata by a slight 1.4% to RM7.20, after our earnings revisions for Robi.
What You Should Do
We maintain our Hold rating on Axiata Group. While we expect earnings growth to rebound in FY15-16 due to the recovery in Celcom and XL, we believe that this has been largely priced in. Axiata trades at FY15 EV/operating FCF of 18.1x, which is in line with its Malaysian peers and above the regional average. Key upside risks are stronger-than-expected earnings from Celcom and XL, while the key downside risk is sustained high capex in the medium term.
Source: CIMB Daybreak - 12 January 2015
Target RM7.20 (Stock Rating: HOLD)
Axiata’s briefing on Robi reaffirmed our optimistic view on its growth prospects. We raise our FY14/15/16 net profit estimates for Robi by 9.4%/6.5%/11.4%. However, this translates into smaller upward revisions of 0.6%/1.0%/1.4% for Axiata Group’s net profit, as Robi only makes up 6-7% of group net profit. No change to our Hold rating but we raise our SOP-based target price slightly to RM7.20. Although we expect earnings recovery in FY15, we believe that the market has priced this into Axiata’s current valuations. For ASEAN telcos, we prefer Telkom Indonesia, SingTel and Thaicom.
What Happened
Axiata hosted an investor/analyst briefing on Friday, during which the CEO and CFO of 91.6%-owned Robi Axiata Ltd (Robi) shared their views on the telecom industry prospects and regulatory landscape in Bangladesh, as well as the company’s strategy and targets. Key points: a) there is significant room for future growth, given the user penetration of less than 50%, b) Robi aims to be a strong No.2 player, expanding its share of market revenue from 25% in 2014 to 30% by 2016, c) capex/sales will remain high this year due to the continued 3G network rollout but is expected to fall below 20% in 2016-17, d) the regulatory landscape is challenging but stabilising and beginning to improve. The key risks are imposition of new taxes, high spectrum prices and market competition.
What We Think
The briefing reaffirmed our optimistic view on Robi’s growth prospects. We raise our FY14/15/16 net profit forecasts for Robi by 9.4%/6.5%/11.4%, factoring in lower effective tax rates and decline in net interest expenses post-2015, when capex intensity falls. At the Axiata group level, the revision boosts our FY14/15/16 net profit forecasts by 0.6%/1.0%/1.4%, as Robi only accounts for 6-7% of group net profit. We also raise our SOP-based target price for Axiata by a slight 1.4% to RM7.20, after our earnings revisions for Robi.
What You Should Do
We maintain our Hold rating on Axiata Group. While we expect earnings growth to rebound in FY15-16 due to the recovery in Celcom and XL, we believe that this has been largely priced in. Axiata trades at FY15 EV/operating FCF of 18.1x, which is in line with its Malaysian peers and above the regional average. Key upside risks are stronger-than-expected earnings from Celcom and XL, while the key downside risk is sustained high capex in the medium term.
Source: CIMB Daybreak - 12 January 2015
