• Overview. Axiata Group Berhad (Axiata) recorded a loss of RM202mn in 9M22  as compared to profit of RM703mn in 9M21 largely due to unrealised forex  losses from Dialog, coupled with higher taxes and net finance cost. However,  Axiata’s normalised profit came in at RM1,077mn (+18%YoY) after excluding  a few exceptional items namely (i) forex and derivative gain/(loss): - RM1,050mn, (ii) XL gain on disposal of tower: RM58mn, and (iii) others: - RM287mn. The improvement in normalised earnings in 9M22 are on the back  of higher EBITDA contribution across all operating companies except Dialog,  Ncell and Smart.

• Key Highlight. Celcom registered a steady top-line growth, or +3.4% YoY to  RM4,578mn driven by higher prepaid revenue and contribution from new acquisition in Celcom’s B2B business unit. It is worth to note that effective cost  management effort has led to double digit EBITDA and PATAMI growth at  12.4% and 65.3% respectively. As for XL, its revenue ex-device was up by 9.3%  YoY in 9M22 benefiting from reopening of the economy, Lebaran period and  higher contribution from data business.

• Against estimates: In-line. Axiata’s 9M22 normalised PATAMI of RM1,077mn  (+17.8% YoY) was in-line our forecast but above consensus, accounting 80%  and >100%, of full year forecast respectively.

• Dividend. The Board declared an interim DPS of 5.0sen (3Q21: 4.0sen) bringing total DPS declared to-date to 5.0sen (9M21: 4.0sen), equivalent to a  DY of 2.0% based on current market price.

• Outlook. We foresee a steady earnings recovery ahead on the back of (i) regional exposure as one of the growing telco players in Asia, (ii) positive recovery in prepaid and postpaid business and (iii) strong position in telco tower industry. Another potential catalyst for Axiata is the outcome of Celcom  Digi merger. Aside to that, the management guided that the group FY22  headline KPIs are (i) revenue growth of above mid-single digit, (ii) EBIT growth  of high single digit and (iii)capex of RM7.1bn.

• Our call. Maintain a BUY call with a TP of RM4.07 based on sum-of-part valuation with each of the operating company valued using EV/EBITDA metric.

Source: BIMB Securities Research - 30 Nov 2022