Monday, September 19, 2011

Axiata steady despite weaker outlook concerns

KUALA LUMPUR: Shares of Axiata Group Bhd dipped at midday on Monday, Sept 19, despite rising concerns from analysts that earnings before interest, tax, depreciation and amortisation (EBITDA) margins could fall over the next few years due to intense competition.

At midday, it was down one sen to RM4.78. There were 2.65 million shares done at prices ranging from RM4.77 to RM4.82.

The FBM KLCI fell 12.48 points to 1,418.45. Turnover was 323.64 million shares done valued at RM550.88 million. There were 164 gainers, 333 losers and 272 stocks unchanged.

At RM4.82, it is 5.85% off its 2011 high of RM5.12 on July 28.

Hwang DBS Vickers said EBITDA margins could fall over the next few years due to intense competition in voice, especially with increasing voice/SMS to data substitution in Malaysia and Indonesia.

'Rising data income is insufficient to offset this as voice remains a major revenue component. Data only accounts for 35-40% of group revenue. Also, current overall data margins are lower than for voice,' it said.

HDBSVR reduced the sum-of-parts derived target price to RM5.10 from RM5.50.

The research house said it expected revenue to grow only 4% in FY11F, below its 10% key performance target, on increasing voice/SMS to data substitution and a stronger ringgit.

'Axiata is the cheapest stock among peers, but offers the lowest dividend yield and upside is likely limited as management had guided that there won't be any dramatic increase. We also believe Axiata may try to conserve cash as it did not rule out M&As in the future. At 14x FY12F PE now, the stock is trading close to its historical average,' it said.


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