• Management presented Axiata’s Vision 2024 where the group aspires to deliver 4 targets for its shareholders – including lower costs, higher EBIT margins, higher dividends (> 20 sen) and to achieve ROIC > WACC.
• Management’s strategy to increase dividend is 4-pronged including: (i) growing its revenue; (ii) lowering opex and finance costs; (iii) trimming the capex, and (iv) increasing the payout ratio of its operating companies.
• Maintain HOLD. While we like Axiata’s focus on improving profit margins and free cash flow, its 2024 aspirations (profit margin, dividend) look ambitious to us, considering the stiff competition, high regulatory risks and high capex requirement to maintain / upgrade the telco network.

Axiata’s vision by 2024 – Next Generation Digital Champion

Axiata hosted its annual analyst & investor day yesterday. Deputy Group CEO Dato’ Izzaddin Idris presented Axiata 5.0 – the group’s aspiration to be the “Next Generation Digital Champion” by 2024 and to deliver 4 targets for its shareholders / investors within 5 years (Fig 1). These include: (i) to lower the unit production cost; (ii) to achieve EBIT margin of >20% (from 14.4% in 2019); (iii) to deliver dividend of over RM0.20 / share (from 8 -10 sen over the last 4 years); and (iv) to achieve ROIC > WACC.

Repositioning to be a high dividend company

Axiata’s Group CFO Vivek Sood detailed the strategy to increase dividend to over 20 sen / share by 2024. Firstly, Axiata targets to increase its net profit to over RM1.8bn by growing its revenue (+RM6bn), reducing opex and depreciation / amortisation (by optimising capex) and reducing its finance costs by over RM100m (tapping into cheaper funding). Secondly, Axiata plans to keep its mobile capex at

Aiming to grow Celcom’s EBIT to RM1.6-1.8bn by 2022

Celcom Axiata’s CFO Jennifer Wong shared the group’s plan to increase Celcom’s EBIT to RM1.6-1.8bn by 2022 (from RM1.3bn in 2019). Some of the initiatives include faster time to market, empowering the regional office, IT in-sourcing (reduce vendor dependency) and revamp its retail operations. Celcom is targeting RM250-270m cost savings by 2022, with 80% of the target value initiatives have been identified.

Source: Affin Hwang Research - 4 Dec 2020