KUALA LUMPUR: RHB Research Institute is Overweight on the telecommunications sector and it sees upside from the from Celcom and DiGi's'' long-term collaboration on network infrastructure sharing in Malaysia.
The collaboration covers four areas: 1) sharing of telecom sites; 2) access transmission; 3) aggregations transmission; and 4) trunk fibre transmission.
RHB Research said the collaboration is expected to increase operational efficiencies for both companies, resulting in an estimated total combined cash savings of RM2.2 billion over 10 years.
Incremental savings would begin in 2012, before gradually ramping up to an average annual savings of RM150 million to RM250 million, combined, after 2015.
'As the smaller entity, DiGi will see a bigger boost to margins and bottomline. Assuming RM110m savings for each company by FY15, all else being equal, we estimate DiGi to experience around 7% boost to FY15 earnings compared to Axiata with 3%. Going forward, this will lead to higher dividends from both.
'As the material savings will only kick in from 2015, we make no change to our forecasts for now. All in, we estimate potential upside of 96 sen (+3.6%) and 9 sen (+1.6%) to DiGi's and Axiata's fair value respectively,' said RHB Research.
The collaboration covers four areas: 1) sharing of telecom sites; 2) access transmission; 3) aggregations transmission; and 4) trunk fibre transmission.
RHB Research said the collaboration is expected to increase operational efficiencies for both companies, resulting in an estimated total combined cash savings of RM2.2 billion over 10 years.
Incremental savings would begin in 2012, before gradually ramping up to an average annual savings of RM150 million to RM250 million, combined, after 2015.
'As the smaller entity, DiGi will see a bigger boost to margins and bottomline. Assuming RM110m savings for each company by FY15, all else being equal, we estimate DiGi to experience around 7% boost to FY15 earnings compared to Axiata with 3%. Going forward, this will lead to higher dividends from both.
'As the material savings will only kick in from 2015, we make no change to our forecasts for now. All in, we estimate potential upside of 96 sen (+3.6%) and 9 sen (+1.6%) to DiGi's and Axiata's fair value respectively,' said RHB Research.
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