Kenanga lowers Axiata's earnings forecast

KUALA LUMPUR: Kenanga Research has lowered Axiata's FY18E/19E earnings forecasts by 1%/03% due to lower-than-expected earnings from XL Axiata as a result of the structural changes in the prepaid market. 

1Q18 revenue was up 4% to Rp5.5tril thanks to the higher service revenue but partially offset by softer internconnect revenue. 

XL's total customer base increased one million to 54.5 million in 1Q18 while its smartphone users grew to 40.3 million with 74% penetration rate as opposed to 65% a year earlier.

Ebitda improved by 7% with margin increasing by 110bps to 36.1% as a result of higher revenue and cost efficiencies. 

Profit after tax, however, dipped by 67% due to the 27% decline in tax benefits recorded in 1Q18. 

"XL continues to build leadership as a data-centric company through focus on data-led products via its dual-brand strategy and combined with continued investment in network. 

"The group continued to expect data monetization, technology innovations as well as the growth from ex-Java to be the key drivers for its revenue growth in FY18 with an aim to perform in line with the industry average (at low single-digit growth)," said Kenanga Research in its Tuesday report.

The research house maintained market perform on Axiata with a lower sum-of-parts-driven target price of RM5.25.

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