Axiata's full-year results met our and street estimates witha variance of 3-5%. The highlight was the higher than expected final DPS of 15sen/share, with the group raising its payout guidance to 65% from 30%. This isa positive surprise considering that the market had under-estimated thetimeline and magnitude of the payout. Axiata stays as one of our top picks inthe telecoms sector given the twin catalysts of reasonable growth and rising dividend yields in closing the gap withits local peers. We maintain our BUY recommendation, with our SOP FV bumped up to RM5.80 (from RM5.60 previously) on rolling over toFY13.
In line- results issecondary. Stripping out one-offs totaling RM40m and RM193m for 4QFY11 andFY11 respectively (including a RM140m broadband tax incentive at Celcom),Axiata's core earnings made up 95% and 97% of our and consensus estimates (resultswere 3% off our/street revenue and EBITDA projections). A pleasant surprise wasthe proposed bumper final DPS of 15 sen/share, which together with the interim DPS totals 19sen/share, or apayout of 60% for FY11 (FY10: 10sen/share). The bumper payout indicates thegroup's willingness to meet investors'expectations of rising dividends as it is rapidly building cash, thanks to the strong operational momentum across few OpCos. FY11 revenue and EBITDAgrowth of 5.3% and 1% respectively fell short of the articulated KPIs of 10%and 10.3% but the market has already priced in the slower growth. Overall, welower our FY12/13 forecasts by 5-7% post the results conference call, duringwhich Axiata shared its 2012 KPIs (seeTable 2).
Celcom revenue growthoutstrips Digi's in 4Q. Celcom's voice resuscitation efforts paid off as they helped arrest the decline in domesticvoice and led to the very strong 4% q-o-q growth in revenue, above Digi's +2%q-o-q and likely Maxis', which is due to announce its results today. Celcom'sMOU/ARPU grew for the second consecutive quarter, with data making up 34% ofrevenue in 4QFY11. While Celcom noted that Maxis was 'quite aggressive'' during the quarter,Digi's earlier observation of stronger competitive response from U Mobilesuggests that the telcos perceive competition from rivals differently, withMaxis possibly seen as a stronger threat to Celcom.
Good showing acrossmost OpCos. XL's revenue grew 3%, supported by a 4% rise in voice revenuedespite the premium SMS ruling while Dialog's EBITDA expanded a strong 11% q-o-qagainst a 3% q-o-q increase in revenue (+10% y-o-y for FY11) as the telcobenefited from the steady pricing environment and kept a tight lid on opex. ItspayTV business (DBN) posted inaugural profits since the business was acquired 6years ago. Robi marked another high in terms of quarterly revenue, up 5% q-o-q,but EBITDA margin fell marginally due to the higher regulatory fees paid torenew its 2G licence.
OTHER HIGHLIGHTS FROMTHE CONFERENCE CALL WITH MANAGEMENT
Driving data across.Axiata highlighted that overall data revenue (including SMS) for the groupsurged 29% y-o-y in FY11 making up 20% of consolidated revenue, led by XL andCelcom. While voice cannibalization remains a concern, it noted that theerosion in voice revenue per minute (RPM) for Celcom and Dialog was under 10%y-o-y compared to the over 20% y-o-y fall across all OpCos (adjusted for forex)indicating stabilization in prices forthe more mature markets. The RPM erosion at XL was a strong 17% y-o-y in FY11, as due to the fiercecompetition from Telkomsel and Indosat, particularly in 1H2011. Axiata expectsEBITDA margin for the group to remain under pressure over the medium term dueto rising proportion of non-voice revenue which incur lower margin.
Dividend payout deemed 'conservative'. Axiatasaid the higher 65% payout guidance hastaken into account potential M&As and capex. It is also independent of the dividendincome it receives from OpCos. We see prospectivedividend streams being supported by its rising FCF yields of 7-10% for FY12/13and on the back of the net debt/EBITDA of 0.7x, leaving room for more capital management initiatives. Our DPS forecasts have been raised to 21 sen/share and 24 sen/sharerespectively for FY12 and FY13.
No equity injectionfor Idea. Axiata is comfortable with its current shareholding in Idea,which is already close to the 20.11% cap allowed under the agreement with itspartner, the Aditya Birla Group. Management believes India's regulatoryoverhang will clear up over the course of the year and highlighted the downside from the recent cancellations of 122 mobile licences in India as having an insignificant impact given thatthe affected circles are EBITDA negative. This is consistent with our earlierview.
RM4.4bn capex for2012. Management has maintained group capex guidance at RM4.4bn for FY12,mainly for Celcom (RM800-RM1bn) which iscurrently modernizing its network and XL (RM2.5bn) which has front-loaded its investmentfor data. Capex spending is likely topeak in 2013.
Source: OSK188
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