Results

Axiata’s 9M13 core net profit of RM2.15bn surprise on the upside, accounting for 82.6% and 79.9% of HLIB’s and consensus full year estimates respectively.

Deviations

Higher-than-expected associates’ contributions.

Dividend

None (3Q12: none) leaving YTD dividend at 8 sen per share (9M12: 8 sen).

Highlights

Celcom’s revenue grew 0.1% qoq and 4% yoy supported by strong net adds of 533k whereby majority were prepaid subscribers, elevating subscriber base to 13.5m with the split of 78.2% prepaid and 21.8% postpaid. Prepaid ARPU stabilized qoq but contracted RM3 yoy to RM35 while postpaid ARPU gave back the RM1 gain in 2Q13 and ended at RM87. YTD, blended MOU (excluding domestic roaming) improved by 2.6% qoq spurred by aggressive usage stimulating initiatives albeit pressure on voice segment from steadfast growth in data usage. Broadband acquisition sustained momentum from 2Q13 by adding 86k (+7.9% qoq) subs elevating total base to new high of 1.17m subs while broadband revenue grew in tandem by 7% qoq to RM283m on the back of mild contraction in ARPU by RM2 qoq to RM58.

XL maintained momentum in subscriber acquisition with 3.9m net adds reaching a base of 58.1m subscribers which remains 99% prepaid-dominated. Blended MOU deteriorated by 9.7% qoq to 167 mins while both prepaid and postpaid ARPUs were relatively unchanged at IDR26k and IDR140k respectively.

Robi’s outperformance mainly driven by VAS’ (incl. data) double-digit growth of 15%. Improved operational performance and cost management resulted in EBITDA growing by 12% qoq, yielding 40.2% margin, up 3.8-ppt qoq and 21.1-ppt yoy.

Guidance: top line growth will be slightly lower than KPI of 7.6% while EBITDA growth will be under some pressure to meet the KPI of 0.2%.

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 pending more guidance from today’s analyst briefing.

Rating

HOLD, TP: RM7.05

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 RM7.05 (see Figure #9).

Source: Hong Leong Investment Bank Research - 28 Nov 2013