PETALING JAYA: Axiata Group Bhd
’s aim of delivering on its value illumination goals outlined in the Axiata 5*5 Strategy, by this year is still within reach, analysts say.
CGS International Research (CGSI Research) said following a meeting with Axiata’s management, the group remains hopeful of achieving its target of illuminating value of Edotco Group Sdn Bhd, which is unlisted, and PT Link Net in Indonesia, by end of this year or early-2026, despite potential risks arising from the recent Cabinet reshuffle in Indonesia as well as other geopolitical shifts across the markets it operates in.
“In our view, delays of weeks and months should not detract from the fact that value illumination of these assets could lead to a reduction in the 40% discount that its shares currently trade at relative to our revised net asset value (RNAV) estimate of RM4.20 per share,” the research house said in a report yesterday.
CGSI Research said the ultimate value-unlocking for Axiata will come from the distribution of its three key assets – CelcomDigi, XLSmart in Indonesia, and Edotco – back to shareholders, thus removing the “holdco discount” associated with its conglomerate structure.
The research firm said market fears over Axiata’s assets in Bangladesh, attracting larger discounts due to the economic difficulties there, and its potential impact on foreign exchange flows, should be allayed by the 21% increase in Bangladesh’s foreign reserves between May and August.
“While this has not been reflected in the Bangladesh taka’s value versus the US dollar, it should mitigate the risks of capital controls, which could hamper dividend payments from Bangladeshi companies including Axiata’s subsidiaries, Robi and Edotco Bangladesh, if implemented,” the research house said.
Bangladesh’s gross domestic product is projected to grow by 3.9% this year, before increasing to 5.1% next year, according to the Asian Development Bank’s report in April.
CGSI Research reiterated its “add” call for Axiata with an unchanged target price of RM3.40.
The research house said it sees upcoming announcements around asset value illumination as the key catalyst for a rerating of Axiata’s shares, which currently trade at a 40% discount to RNAV.
“Meanwhile, a commitment to pay a 10 sen a year dividend per share provides 3.9% dividend yield support for this year,” the research house said.
Key downside risks are failure to monetise 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, the research house said.
