Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD
Research House: HWANGDBS

Telecommunications sector
Low broadband penetration in the country and the shift away from desktops to laptops and smartphones, as well as increasing use of the internet for social interaction, are expected to drive demand for data. We expect major mobile telcos' (Maxis Bhd, DiGi.Com Bhd and Celcom Axiata Bhd) share of mobile broadband revenue to grow from 3% to 6% in FY09 to 10% to 18% this year, driven by the continued growth of broadband subscribers. Green Packet's revenue is projected to jump 35% year-on-year in 2011on the back of a 46% increase in broadband revenue, while TM's share of internet revenue (against total retail revenue) is projected to inch up to 24% from 23% in FY09.

This is premised on the abundant broadband demand opportunities for all players. We expect telcos' profits and cash flows to be sustained this year, as a growing broadband subscriber base should drive broadband revenue and offset weak voice ARPUs. In turn, this should support dividend yields.

We have a 'buy' call and sum-of-parts-derived RM5.10 target price for Axiata. The group is set to record strong 48% FY09F/12F earnings compound annual growth rate. Its Malaysian unit (Celcom) continues to do well especially in the broadband segment, and it has exposure in fast-growing overseas markets including Indonesia, Sri Lanka and Bangladesh. We expect XL in Indonesia to continue to gain market share while keeping costs under control. The Bangladesh unit should continue to grow supported by the customer reactivation and retention exercises, while the Sri Lankan unit should improve further, riding on the country's economic recovery and an enhanced operating cost structure. ' HwangDBS Vickers Research, Jan 6


This article appeared in The Edge Financial Daily, January 7, 2011.