Results

• Further forex loss – Axiata posted a net loss of RM52m in 3Q22  compared to PATAMI of RM350m in the previous year, mainly due to  unrealised forex losses following the depreciation of the Sri Lankan  rupee (LKR) and Malaysian Ringgit. Excluding the forex loss,  Underlying PATAMI declined 4.8% YoY to RM375m with Celcom  leading the earnings growth.

• Higher revenue - Quarterly revenue grew 11% YoY to RM7.26b due  to higher contribution from all Operating Companies (OpCos) except  Ncell (Nepal). 

• Better QoQ – 3Q22 underlying PATAMI grew 14.5% QoQ to  RM380m mainly due to higher profits in all OpCos except Ncell and  edotco. Quarterly revenue rose 8.3% QoQ to RM7.26b due to higher  sales in all OpCos except Ncell. 

• Steady margins – Axiata maintained its EBITDA margin of 45%  thanks to cost savings initiatives of RM645m (capex RM388m and  opex RM257m). All OpCos delivered EBITDA growth except for Dialog  and Ncell (Nepal).

• Higher gearing – Net debt/EBITDA was higher at 2.56x vs 2.48x in  2Q22 due to higher debt to fund acquisitions of Link Net and  Philippines towers. Adjusted Operating free cash flow stands at  RM825m while cash reserve increased to RM7.7b from RM6.6b 2Q21.

• Dividend announced – The management has announced an interim  dividend of 5 sen. Earnings Outlook/Revision 

• Earnings above expectation – 9M22 revenue (+11% YoY to  RM21b) and underlying PATAMI (+19% YoY to RM1.1b) achieved  80% and 86% of our full year forecasts respectively. 

• Forecast lifted – We are raising our revenue and EPS forecasts for  FY22 by 4% and 9% respectively while estimates for FY23 are lifted  by 6% and 37% respectively.

• Management guidance - The management maintained its 2022  guidance of: a) mid-single digit Revenue growth. b) high-single digit  EBIT growth and c) capex of RM7.1b.

Valuation & Recommendation

• Maintain BUY with a lower target price of RM3.65 based on Sum-OfParts (SOP).

• Caution ahead – Going forward, the management is cautious on macroeconomic challenges that could impact its KPIs such as Global  inflationary pressures, higher interest rates, currency volatility, and  regulatory risks.  

Source: JF Apex Securities Research - 29 Nov 2022