Celcom will be lowering the prices of its broadband plans for both homes and businesses in Sabah.
KUALA LUMPUR: CIMB Equities Research downgraded Axiata Group from Add to Hold on an unchanged sum-of-parts based target price of RM4.40, after the share price rose 24% in the past three months.
It said on Monday Axiata FY19F enterprise value/operating free cashflow of 21.7 times is at a 47% premium over the Asean telco average.
“Upside risk: better-than-expected Celcom earnings. Downside risks: adverse regulatory developments in Malaysia/Nepal, more intense competition in Indonesia and forex risks,” it said.
Despite much lower share of losses from Idea, 4Q18 core EPS (pre-MFRS 15, including Idea) slipped 14.7% on-quarter (-3.4% on-year) amid wider losses from digital businesses and weaker earnings at Celcom.
The FY18 core EPS was 12% short of CIMB Research forecast (above Bloomberg consensus by 40%).
Key variance: larger-than-expected digital business losses. FY18 DPS was in line, at 9.5 sen (4Q17: 8.5 sen), implying 85% payout. Axiata’s FY19 KPI targets are revenue/EBITDA to grow 3-4%/5-8%, with capex of RM6.8bn.
Celcom: Weak prepaid; cost initiatives showing results.
Celcom’s 4Q18 service revenue was steady on-quarter (-1.7% on-year), worse than Maxis’s/Digi’s +1.2%/+0.5% on-quarter, due to weak prepaid performance as subs declined 256k on-quarter (-4.0%) even as ARPU rose 5.9% on-quarter (+5.9% on-year). Postpaid ARPU grew 3.4% on-quarter (+5.7% on-year) while it added 102k subs on-quarter (+3.5%).
EBITDA was up 6.0% on-quarter (-4.7% on-year) on 2.0% pts margin improvement (-0.2% pts on-year) as a result of cost-saving initiatives. However, net profit was down on-quarter on higher depreciation and tax.
Digital business & Dialog down; XL, Robi, Smart & Ncell improved. The 4Q18 digital business losses widened by RM48m on-quarter. Dialog’s contribution also reduced by RM4m on lower revenue, forex losses and higher depreciation.
On the positive side, XL’s negative earnings contribution reduced slightly. Losses from Robi narrowed by RM7m in 4Q18 due to higher revenue and EBITDA margin. Smart’s contribution gained RM7m, owing to strong data revenue and easing competition, while Ncell contributed a higher RM29m on-quarter, mainly due to lower depreciation.
“We cut our FY19/20F core EPS by 15%/9%, mainly to factor in: a) the removal of M1’s earnings after the stake sale, and b) adoption of MFRS 15. Elsewhere, we raise our earnings forecasts for Celcom and XL but these are offset by lower earnings forecasts for Dialog and Ncell.
“Post revision, we expect Axiata’s core EPS to rise 45.7%/21.4%/14.7% on-year in FY19/20/21F due to the cessation of equity accounting for Idea, stronger Celcom earnings and turnaround at XL,” CIMB Research said.
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