• Overview. Axiata Group Berhad (Axiata) recorded continuing operating profit of RM21,726mn in 2022 (8.7% YoY) driven by growth across all operating companies except for mobile operations in Sri Lanka and Nepal. In tandem with that, Axiata’s continuing operations normalised profit came in at  RM1,587mn (+19.7%YoY) after excluding a few exceptional items namely (i)  forex and derivative gain/(loss): -RM770mn, (ii) XL gain on disposal of tower:  RM77mn, (iii) net gain on disposal of Celcom: RM13,472mn and others.

• Key Highlight. Celcom FY22 revenue ex-device declined by 3.7% YoY due to the deconsolidation of Celcom on 30 November. EBIT improved however or by +63.3% YoY largely from (i) operational excellence and (ii) absence of 3G  accelerated depreciation. Celcom FY22 earnings were up by +43.2% YoY to  RM1.4bn in line with higher EBIT though partly offset by higher taxes i.e., Cukai Makmur. As for XL business, its FY22 revenue grew by +9.0% YoY powered by an increase in data contribution and ARPU. EBITDA lagged revenue growth nonetheless due to a jump in OPEX from direct cost and regulatory cost. In-line with that, XL earnings PATAMI was down by 13.9% YoY on the back of higher net finance cost and absence of a one-off gain in FY22.  Meanwhile, EDOTCO also improved due to growth in B2S and Colo. Revenue expanded by +25.4% YoY led by organic rollout and colocation.

• Against estimates: In-line. Axiata’s 2022 normalised PATAMI of RM21,756mn  (+8.7% YoY) was above our and consensus forecasts, accounting >100% of full year forecast for both.

• Dividend. The Board declared an interim DPS of 5.0 sen (4Q21: 5.5sen) bringing total DPS declared to-date to 14.0 sen (2021: 9.5sen), equivalent to a  DY of 5.0% based on current market price.

• Outlook. We foresee a flattish earnings recovery ahead despite its regional exposure as one of the growing telco players in Asia and the outcome of  Celcom Digi merger. Aside to that, the management’s guided FY23 KPIs include (i) revenue growth of mid-single digit, (ii) EBIT growth of high single digit and (iii) capex of RM7.1bn.

• Our call. We tweak our FY23-24F earnings forecasts slightly higher by 3%-2%,  after some housekeeping based on the latest financial results. Maintain a BUY call with a TP of RM4.10 (from RM4.07) based on sum-of-part valuation with each of the operating company valued using EV/EBITDA metric.

Source: BIMB Securities Research - 24 Feb 2023