Investment Highlights

• We maintain our BUY call on Axiata Group (Axiata) with an unchanged sum-of-parts-based fair value of RM4.90/share which implies an FY20F EV/EBITDA of 5.5x – 1 standard deviation below its 3-year average of 6.2x.

• Axiata has appointed Dato’ Mohd Izzaddin Idris as the candidate to replace its current President/Group Chief Executive Officer (CEO) Tan Sri Jamaludin Ibrahim, who has informed the Board of his decision to retire after helming the group for four terms and holding senior roles in the telecommunications and ICT sector for 39 years.

• Jamaludin started his career as a lecturer in Quantitative Methods at California State University, USA in 1980. He then spent 12 years in IBM as Systems Engineer and then in various positions in Sales, Marketing and Management. In 1993, he was appointed CEO of Digital Equipment Malaysia.

• Jamaludin joined Maxis Communications in 1997 and was subsequently appointed CEO in 1998 and re-designated Group CEO in 2006. Retiring from Maxis in 2007, he joined Axiata as the Managing Director/President & Group CEO in 2008.

• His successor, Izzaddin has served in Axiata’s Board as its independent/non-executive director since November 2016. He was the Group Managing Director/CEO of UEM Group from July 2009 to October 2018.

• Before assuming his role in UEM Group, Izzaddin was the Chief Financial Officer/Senior Vice President (Group Finance) of Tenaga Nasional from September 2004 to June 2009. He has over 20 years of experience in the fields of investment banking, finance and general management at senior positions in Malaysian International Merchant Bankers, Malaysian Resources Corporation and Southern Bank.

• In the interim before Izzaddin takes over, he will be redesignated as the Deputy Group CEO (DGCEO), Executive Director and Group CEO-designate from today, reporting to Jamaludin who will remain as the Group CEO with his contract extended until end-December 2020.

• We expect the group’s strategy and policies (See Exhibit 1) to remain mostly unchanged, given Izzaddin’s existing role in the group amid the steady hand-over process. As DGCEO, Izzaddin will oversee key corporate functions namely Finance, Strategy, Marketing, Corporate Affairs, Cybersecurity, Privacy and Trust, and Ethics and Compliance. Additionally, he will be responsible for edotco, and Axiata’s digital services business.

• Axiata currently trades at a bargain FY20F EV/EBITDA of 5x vs. Maxis' 12x for a regional operator with excellent prospects of monetising its multiple businesses.

Source: AmInvest Research - 24 Jan 2020