Thursday, December 1, 2011

RHB Research maintains market perform on Axiata, fair value RM5.35

KUALA LUMPUR (Dec 1): RHB Research Institute is maintaining its market perform call on Axiata Group Bhd with an unchanged sum-of-parts fair value of RM5.35.

It said on Thursday that it sees limited upside to Axiata's regional growth prospects, which continue to moderate, while simultaneously facing lingering regulatory (India and Bangladesh) and currency (appreciating ringgit) risks.

The research house said Axiata's 9MFY11 core net profit of RM1.95 billion (+3.7% on-year) accounted for only 69% and 71% of its and consensus full-year estimates respectively.

RHB Research said the key variances were a stronger ringgit (lower translated figures to Axiata) and pressure on earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

It added that quarter-on-quarter, group revenue rose 3.6% due to higher contribution from all main subsidiaries, in particular, Celcom (+3% on-quarter) and XL (+5% on-quarter in Indonesian rupiah terms).

The 3Q EBITDA grew at a slower pace of 2.9% due to cost pressures at Celcom (higher interconnect charges due to surge in usage) and XL (higher labour cost from severance payments).

'Pending Axiata's teleconference call later in the morning, we have kept our earnings forecasts unchanged.

'We expect to learn more details about its latest MVNO pact with Philippines-based PLDT Global Corp to offer mobile prepaid services to Filipino workers in Malaysia, but contributions from MVNOs currently remain minimal at 5% of overall revenue,' it said.


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