PETALING JAYA: Axiata Group Bhd
’s 44% discount to its revalued net asset value (RNAV) has further room to narrow as the group delivers on its stated goal to value illuminate its stakes in edotco and Link Net.
CGSI Research’s non-consensus thesis on Axiata requires that edotco be monetised either via a stake sale or an initial public offering.
This allows the value of Axiata’s three core assets, CelcomDigi Bhd, its Indonesia’s based-XLSmart and its tower business via edotco, to be distributed to shareholders via a dividend in specie. These three assets make up 91% of Axiata’s RNAV, which it estimates at RM4.20 a share.
Its base case is for edotco to be monetised at 15 times the financial year 2026 (FY26) enterprise value/earnings before interest tax depreciation and amortisation in 2027.
An immediate value unlocking at a lower multiple would still be value accretive to shareholders based on the assumption that cash raised would be returned to shareholders or used to pare down debt, thus lifting equity values.
The house reiterates its “add” call on Axiata with an increased RNAV-derived target price of RM3.40 from RM3.37 a share. The shares were last traded at RM2.34.
Any announcement around asset value illumination is seen as the key catalyst for a re-rating of its shares, which currently trades at a 44% discount to RNAV.
A commitment to pay 10 sen per annum in dividend per share provides a 4.3% FY25 dividend yield support.
The key downside risks cited include failure to monetise its assets resulting in the discount to RNAV staying elevated and a sharp deterioration in its operating profits at key subsidiaries due to stiffer price competition or macroeconomic shocks.
