PETALING JAYA: The divestment of telecoms tower operator Edotco Myanmar Ltd, although at a huge loss, is still a positive for Axiata Group Bhd
as continued exposure to a military-led regime would have posed risks, analysts say.
More importantly, the exit may pave the way for renewed interest from strategic or financial investors in other assets within Axiata’s portfolio, such as Edotco Group Sdn Bhd, PT Link Net Tbk in Indonesia, financial technology arm Boost Holdings Sdn Bhd, and artificial intelligence and data company ADA Asia Malaysia Sdn Bhd, said Kenanga Research.
Axiata’s 63%-owned Edotco Group has completed the sale of its 87.5% stake in Edotco Myanmar for US$90mil (RM380mil), incurring a pro forma net loss of RM130.3mil.
The buyer is reported to be Myanmar conglomerate Yoma Strategic Holdings.
The final price reflects a 40% cut from the initial US$150mil offer in April last year.
Proceeds from the disposal will be used to repay debt and support Edotco’s working capital requirements.
Kenanga Research said it believes the successful repatriation and redeployment of the funds will strengthen Edotco’s balance sheet and liquidity position, potentially paving the way for its plans to distribute maiden dividends this year, particularly from its core markets of Malaysia, Bangladesh and Cambodia.
The research house said potential investors would likely have viewed continued exposure to Myanmar under a military-led regime as a reputational and compliance risk.
With this hinderance removed, Kenanga Research said it believes Axiata is better positioned to unlock value and any future monetisation of core assets could more than compensate for the financial losses incurred from the disposal of Edotco Myanmar.
CIMB Research maintains its “buy” call with a target price (TP) of RM2.55 a share on Axiata, with potential asset monetisation initiatives in the next 12–18 months as a re-rating catalyst.
However, a key downside risk is that the asset monetisation initiatives do not materialise, or the valuations achieved are unattractive.
Kenanga Research retained its “market perform” call on Axiata with a target price of RM2.15 a share.
As Edotco Myanmar had no debt apart from lease liabilities of RM45.7mil, the research house estimates that the transaction will result in a marginal reduction in Edotco Group’s net gearing to 0.83 times from 0.81 times for this year.
