KUALA LUMPUR: AmInvestment Bank is maintaining its Buy call for Axiata Group with an unchanged sum-of-parts (SOP)-based fair value of RM7.68 a share.
It said on Thursday at RM7.68, this implied a FY16F enterprise value/earnings before interest, tax, depreciation and amortisation (EBITDA) of eight times, which was 40% below Singapore Telecommunications Ltd’s present 14 times.
“Excluding a RM15mil net gain on the disposal of XL towers and RM111mil forex loss, Axiata’s 1QFY16 normalised net profit of RM464mil was below expectations, accounting for 18% of both our earlier FY16F earnings and street estimates.
“However, our FY16F-FY18F earnings have only been marginally adjusted as we expect the maiden contribution of 80%-owned Nepal-based NCELL by 2QFY16 to underpin the group’s earnings trajectory,” said the research house.
AmInvestment said Celcom’s 1QFY16 EBITDA, which contributed 33% to the group, slid 6% on-quarter to RM617mil on a 9% on-quarter revenue decline from loss contributions from value added services and the migrant segment amid competitive pressures resulting in subscribers declining by 175,000 to 12.1 million.
This came wholly from the prepaid segment as postpaid rose 37,000 from FirstGold launch in February this year. Management indicated that Celcom’s takeup rates continued to improve from February this year, making inroads from new product launches into competitors’ postpaid market share in 2QFY16.
As a comparison, Maxis lost 384,000 net subscribers while Digi gained 211,000 during the same quarter.
Amongst the three main celco players, Celcom’s subscriber market share was slightly higher on-quarter at 33% in 1QFY16. Axiata’s 92%-owned Robi in Bangladesh registered on-quarter drops of 16% for revenue and 21% for EBITDA as subscriber base dropped 3% to 27.5mil from intense competition amid regulatory requirements for bio-metric registrations starting in December last year.
“We are neutral on the potential abortion of the proposed Robi-Airtel merger arising from disputes on the government’s imposition of a merger fee given the dilutive impact of AirTel’s losses. The stock currently trades at a bargain FY16F EV/EBITDA of seven times, below its two-year average of 8.6 times,” said AmInvestment.
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