Axiata is among Maybank Investment Bank's top 10 picks during current volatile market.
KUALA LUMPUR: AmInvestment Research is maintaining its Buy call on Axiata Group and sum-of-parts (SOP) based fair value of RM6.15 a share.
It said on Thursday this implies an FY16F EV/EBITDA (enterprise value/earnings before interest, tax, depreciation and amortisation) of seven times – half of Singapore Telecommunications Ltd’s current 14 times.
AmInvestment Research said Axiata trading at a bargain FY17F EV/EBITDA of six times, below its three-year average of 8.2 times. As a comparison, Maxis and Digi trade at FY17F EV/EBITDA of 13 times. Additionally, Axiata’s dividend yields are attractive at 4%.
“Axiata’s FY16F-FY18F earnings have been fine-tuned as its 66.5%-owned XL Axiata’s (XL) FY16 core net loss of IDR209bil was in line with our forecast of IDR217bil, but much better than consensus’ loss estimate of IDR467bil. Hence, assumptions for Indonesia-listed XL’s FY17F-FY18F are also largely unchanged.
“After adjusting for one-off accelerated depreciation, forex, tax and capital lease gains, XL’s 4QFY16 core net profit of IDR41bil was a welcome relief following five consecutive quarters of normalised losses.
“The improved 4QFY16 performance stems from a 1% increase in tower lease revenue, 15% reduction in interest charges from its recent rights issue and tower sale together with a 17% net depreciation reduction (adjusted for accelerated charges).
“On a quarter-on-quarter basis, XL’s 4QFY16 EBITDA margin slid 3ppts to 35% due to a 6% increase in operating expenditures of which 34% stemmed from sales and marketing, 29% from inter-connection fees, 16% from salaries and 13% from higher tower rental costs.
“As XL currently accounts for 9% of Axiata’s sum-of-part, Axiata’s growth catalyst stems from its recently acquired NCELL, as the maiden Nepal-based contributions will increase the group’s FY17F earnings by 10% in FY17F,” it said.
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