What’s New

• Aiming for telco towers in Kedah - Axiata’s tower subsidiary edotco Malaysia is buying 80% of a tower company in Kedah for RM140m. In an announcement, Axiata said its tower unit is acquiring 80% stake in Tanjung Digital Sdn Bhd (TDSB) from Utara Jernih Sdn Bhd and Mohd Azam bin Saad, who owns 64% and 36% of TDSB respectively.

• Pakistan update – In a separate announcement, edotco Pakistan has received approval from Pakistan Telecommunication Authority (PTA) to buy 45% stake in Deodar from Dawood Hercules.

Comment

• We are positive with these developments in the group’s telco tower business as it will further strengthen its topline and bottom line in the long run. TDSB owns 225 towers in Kedah and the acquisition will allow edotco to cement its leading position in Malaysia.

• Bolstering its overseas operations. To recap, edotco announced the acquisition of Deodar in Pakistan in August 2017 and the deal would see edotco become the 8th largest tower operator in the world. Deodar owns 13,000 towers in Pakistan and has Jazz, the biggest telco in Pakistan, as its anchor tenant. The deal would increase edotco’s tower count to 31,000 globally.
• Going forward, further regulatory approvals are being granted by PTA on the change of shareholding structure in Deodar, and the central bank on the funding of the acquisition.

Earnings Outlook/Revision

• Forecast maintained – We are keeping our EPS forecast for FY18 and FY19 unchanged as we have not included potential contribution from Deodar pending approvals.

Valuation & Recommendation

• Maintain HOLD with an unchanged target price of RM5.20 based on Sum-Of-Parts (SOP).

Source: JF Apex Securities Research - 7 May 2018