Axiata is expected to stage profit rebound in Q3

According to AmInvestment Bank Research, the earnings expectation remained within its FY20 forecast earnings of RM526mil, which is 18% below consensus’ RM638mil.

PETALING JAYA: Following a plunge in normalised earnings for the second quarter by 79% year-on-year to RM45mil, Axiata Group Bhd’s upcoming third quarter results are expected to rebound to a net profit that will surpass its first quarter’s RM121mil.

According to AmInvestment Bank Research, the earnings expectation remained within its FY20 forecast earnings of RM526mil, which is 18% below consensus’ RM638mil.

The research house said Axiata has indicated that the businesses for most of its regional operations have recovered in the third quarter of FY20, following the relaxation of Covid-19 lockdowns, except for Ncell in Nepal.

Nepal is still under prolonged movement restrictions amid high daily infection rates, delayed spectrum availability and population migration to rural areas that have adversely affected Ncell’s subscriber trends.

“The group’s 67%-owned XL Axiata is performing well given the relatively lenient movement restrictions in Indonesia together with the utilisation of edotco’s towers.

“The possible removal of the telecommunication sector from Indonesia’s negative investment list could mean new strategic investors that could help fund edotco’s tower expansion programme.

“However, management is cautious on Malaysia’s recently tightened conditional movement control order impact on wholly-owned Celcom’s subscriber rates and average revenue per user, ” said AmInvestment Bank.

On the group’s RM5bil cost savings programme, Axiata is expected to mostly achieve its target by year-end, which has been fast-tracked from 2017 to 2021 timeline.

This is likely to provide support to the group’s earnings for the second half of FY20.

The research house also noted that the transition of current group president and CEO Tan Sri Jamaludin Ibrahim to Datuk Izzaddin Idris by December 2020 is going smoothly.

“Both are jointly planning and executing the group’s strategy to optimise operational efficiencies and deliver on profit and dividend targets with the group positioning to be a dividend yielding company over the next three to five years, ” it said.

Additionally, Axiata planned to realise the value of digital businesses with new strategic investors.

AmInvestment Bank noted that this could limit Axiata’s own capital commitments to a minimal US$15mil to US$20mil over the next three years - most of which would be utilised for digital finance services.

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