Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: CIMB
Axiata Group Bhd
(Feb 24, RM4.85)
Maintain outperform at RM4.95 with target price RM5.90: Axiata's FY10 core net profit was 5% and 4% below CIMB and market expectations due to weak net profit for Celcom and Robi. It also wrote RM1.08 billion off its carrying value of Idea. On a positive note, Axiata proposed a 10 sen maiden single-tier dividend per share (DPS) or 32% payout, in line with our expectations but above the market's three sen estimate.
Axiata expects 10% growth of both its FY11 revenue and earnings before interest, tax, depreciation and amortisation (Ebitda), driven mainly by XL and Robi. We lower FY11/12 core net profit by 3% to 4% to factor in Celcom's slower growth, but double our DPS estimate as we expect a higher payout.
However, our sum-of-parts-based target price is unchanged at RM5.90. While Celcom's growth is slowing, Axiata remains an 'outperform' and our top Malaysian telco pick as Robi is emerging as a key growth driver coupled with dividend upside. A likely re-rating catalyst is dividend surprises.
Celcom's revenue and core net profit were little changed quarter-on-quarter (q-o-q) due to weaker voice revenues while data revenues came from a high base in the festivity-driven 3Q. Its revenue lagged behind DiGi.Com Bhd's 2% q-o-q rise in service revenue. We are still concerned about deflating voice revenues, which are being cannibalised by data revenues. Robi's core net profit fell 51% q-o-q due to the write-off of obsolete SIM cards and higher bad debt provisions.
Given its strong FY11/13 free cash flow forecast, which is 1.2 to 1.3 times core net profit, and lack of acquisition targets, we expect Axiata to double its payout ratio to 60% in FY11 and FY12. The telco says there are no acquisitions on the table and it intends to increase its payouts as its balance sheet is 'lazy'. It may increase the payout frequency from the current annual payout. Even at 60% payout, we expect the telco to be in a net cash position by FY12.
Axiata expects FY11 revenue and Ebitda to rise 10%, fuelled by growth in the high-teens to low 20s for Robi and high single-digit to low teens growth for XL. Revenue growth for Celcom and Dialog is expected to be in the mid-single-digit range. For Celcom, it will entirely be driven by data as it expects voice revenue to stagnate. ' CIMB Research, Feb 24
This article appeared in The Edge Financial Daily, February 25, 2011.
Company Name: AXIATA GROUP BERHAD
Research House: CIMB
Axiata Group Bhd
(Feb 24, RM4.85)
Maintain outperform at RM4.95 with target price RM5.90: Axiata's FY10 core net profit was 5% and 4% below CIMB and market expectations due to weak net profit for Celcom and Robi. It also wrote RM1.08 billion off its carrying value of Idea. On a positive note, Axiata proposed a 10 sen maiden single-tier dividend per share (DPS) or 32% payout, in line with our expectations but above the market's three sen estimate.
Axiata expects 10% growth of both its FY11 revenue and earnings before interest, tax, depreciation and amortisation (Ebitda), driven mainly by XL and Robi. We lower FY11/12 core net profit by 3% to 4% to factor in Celcom's slower growth, but double our DPS estimate as we expect a higher payout.
However, our sum-of-parts-based target price is unchanged at RM5.90. While Celcom's growth is slowing, Axiata remains an 'outperform' and our top Malaysian telco pick as Robi is emerging as a key growth driver coupled with dividend upside. A likely re-rating catalyst is dividend surprises.
Celcom's revenue and core net profit were little changed quarter-on-quarter (q-o-q) due to weaker voice revenues while data revenues came from a high base in the festivity-driven 3Q. Its revenue lagged behind DiGi.Com Bhd's 2% q-o-q rise in service revenue. We are still concerned about deflating voice revenues, which are being cannibalised by data revenues. Robi's core net profit fell 51% q-o-q due to the write-off of obsolete SIM cards and higher bad debt provisions.
Given its strong FY11/13 free cash flow forecast, which is 1.2 to 1.3 times core net profit, and lack of acquisition targets, we expect Axiata to double its payout ratio to 60% in FY11 and FY12. The telco says there are no acquisitions on the table and it intends to increase its payouts as its balance sheet is 'lazy'. It may increase the payout frequency from the current annual payout. Even at 60% payout, we expect the telco to be in a net cash position by FY12.
Axiata expects FY11 revenue and Ebitda to rise 10%, fuelled by growth in the high-teens to low 20s for Robi and high single-digit to low teens growth for XL. Revenue growth for Celcom and Dialog is expected to be in the mid-single-digit range. For Celcom, it will entirely be driven by data as it expects voice revenue to stagnate. ' CIMB Research, Feb 24
This article appeared in The Edge Financial Daily, February 25, 2011.
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