Results

Axiata’s 1Q13 core net profit of RM658.0m came in within our expectations, accounting for 25.3% of HLIB’s full year forecast and but shy of consensus estimate by 8.0% if annualized.

Deviations

In line.

Dividend

None (1Q12: none).

Highlights

Celcom revenue was flat qoq even with the strongest net adds of 376k in the past 5 quarters, enlarging subscriber base to 13.1m with the split of 77.8% prepaid and 22.2% postpaid. Both prepaid and postpaid ARPU continue to slide to RM87 (-RM5 qoq and -RM9 yoy) and RM35 (-RM1 qoq and -RM2 yoy) respectively. Lower pricing failed to stimulate higher usage resulted in similar downtrend for prepaid and postpaid MOU to 297 mins (-4.2% qoq and -19.9%) and 199 mins (-0.5% qoq and -6.1% yoy) respectively. Marginal churn (-20k net adds) in broadband subscribers to 1,027k did not stop sales to top RM256m (+19.0% yoy and +3.0% qoq) with stabilized ARPU of RM60.

XL maintained momentum in subscriber acquisition with 3.4m net adds reaching a base of 49.1m subscribers which remains 99% prepaid-dominated. Blended MOU was marginally eroded, but both postpaid and prepaid ARPUs plunged to IDR127k (-8.6% qoq and -18.1% yoy) and IDR27k (-15.6% qoq and -3.6% yoy) respectively.

Dialog added 274k subscribers in 1Q13 to surpass 8m mark with prepaid to postpaid mix of 89:11. Both blended ARPU and MOU dipped marginally to SLR354 (-1.1% qoq) and 159 mins (-3.6% qoq).

Robi’s subscriber base totaled 33.5m after acquiring 364k with majority prepaid in 1Q13. Bucking the trend, Robi’s blended ARPU and MOU gained significantly to BDT167 (+4.4% qoq) and 156 mins (+8.3% qoq).

Catalysts

• Higher smartphone penetration boosting data ARPU.
• Strong growth in low penetration developing markets.
• More cost savings from collaboration with DiGi.

Risks

Regulatory risks, FOREX fluctuations and competitive risks.

Forecasts

Unchanged.

Rating

HOLD, TP: RM6.63

• Positives – Despite the challenging environment, Axiata’s main OpCo (Celcom, XL, Dialog) continue to execute well.
• Negatives – Exposure to Indian telecom market which is currently under close scrutiny by the government.

Valuation

• Maintain HOLD call on the stock with unchanged SOP TP of RM6.63

Source: Hong Leong Investment Bank Research - 23 May 2013