Results

On the back of IDR21,350bn turnover, XL’s FY13 core net profit of IDR1,809bn came in within expectations, accounted for 97.8% of consensus’ full year forecast.

One-off adjustments:

1. Unrealized FOREX loss amounted to IDR815bn;

2. Accelerated depreciation of IDR220bn; and

3. Tax impact incentive of IDR259bn.

Deviations

In line.

Highlights

YTD: Revenue was flat with data & VAS the fastest growing services with double digit growth of 16% and 34% respectively, while voice and SMS declined by 7% and 4% respectively. Non-voice revenue contributed 54% (+4ppt yoy) of XL’s total usage revenue.

FY13 EBITDA: decreased 11% yoy while margin contracted from 46% to 41% largely due to the introduction of SMS interconnect, expansion of data infrastructure on lease model thus impacting infrastructure costs and a full year impact of managed services fee.

Subscribers: XL recorded 60.5m or 32% increase yoy

Data and VAS: Sustainable exponential growth with 142% yoy reaching 54,615TB per annum. Data subscribers reached 33m or about half of the total base. Data has remained the fastest growing service in FY13 with its contribution to overall sales increased from 20% to 23%.

Infrastructure: has installed 15.1k NodeBs as of 4Q13 bringing total number of 2G and 3G BTS to 44.9k. Continue to upgrade its network through modernization in majority 2G and 3G sites across Indonesia, which delivers better network speed, capacity and energy efficiency.

Smartphone: grew significantly by 21% yoy, reaching 10.2m users or 17% of the total base.

Axis acquisition: received key approvals from regulators as well as shareholders.

Guidance: low teens top line growth with mid 30’s EBITDA margin supported by CAPEX of ~IDR7tr.

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: 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 #2).

Source: Hong Leong Investment Bank Research - 7 Feb 2014