Photo by Shahrin Yahya/The Edge

KUALA LUMPUR (July 25): Shares in Axiata Group Bhd (KL:AXIATA) extended their decline on Thursday, and nearly wiped out this year’s gain, amid concerns over the impact of civil unrest in Bangladesh on the group's key subsidiary.

Axiata fell to RM2.42, its lowest since Jan 4. The stock ended the day at RM2.43, down six sen or 2.4% from the previous day. At its last price, the largest mobile telecommunications company in Malaysia by revenue had a market capitalisation of RM22.31 billion on Bursa Malaysia.

On the same day, Apex Securities cut its target price for Axiata to RM2.55 from RM2.94, flagging rising macroeconomic risk from the frontier market as well as weaker investor sentiment.

Escalating anti-government protests in Bangladesh would affect Axiata’s Robi due to its reliance on the prepaid mobile business, the research house said. Robi Axiata PLC, doing business as Robi, is the second largest mobile network operator in Bangladesh and contributed 18% of Axiata’s operating profit.

Shares in Axiata have declined for the fourth consecutive day and lost more than 13% since the start of June. The movement in Bangladesh, originally led by university students demanding changes in the long-standing quota-based system for government jobs, has expanded following the deaths of nearly 200 people.

To crack down on the protest, the Bangladeshi government has closed almost all education institutions, shut down mobile internet and imposed curfews.

Axiata's exposure to Bangladesh is primarily through its 61% ownership in Robi, and its tower assets via 63%-owned Edotco, Apex noted. However, there would be “minimal” impact on Edotco due to the security provided by long-term contracts, which ensure consistent revenue, the house said.

Apex is trimming its net profit forecast for Axiata by 3.7% for the financial year ending Dec 31, 2024 for now, “while awaiting further clarification”.

Further, Axiata continues to face geopolitical, macroeconomic and regulatory risks, as well as a strengthening US dollar and high interest rates, the house noted.