Period   1Q12 

1Q12 core NP of RM687m was above our expectation as well as that of market consensus. The core earnings accounted for 27.8% and 25.2% of ours and the street's full year estimates. The higher core NP was mainly due to the better than expected margins and higher contributions from associated companies. 

Dividends  No dividend was announced during the quarter.

YoY, revenue rose 8% to RM4.26b driven by higher contribution from all key operating companies despite the continuing strength of the Ringgit. On a constant currency basis, revenue would have grown 10.4%. EBITDA grew 4.1% but the margin dipped by 1.5pp to 42.4% mainly due to aggressive network roll-out cost in Indonesia to accommodate data growth. Core NP, however, increased by 8.2% thanks to higher operational contribution and a lower effective tax rate (15.4% vs. 19.4%). 

QoQ, turnover was flat at -0.2% while the core NP was up by +17.4%, mainly boosted by the lower operational costs coupled with higher contribution from its associate companies, leading its PBT to grow by 29.2% to RM905m.  

Celcom performed very well with revenue growing 10% YoY to RM1.9b but with lower EBITDA margin of 44.0% vs. 46.7% in 1Q11. Broadband grew 15% YoY to RM215m with advanced data (excluding SMS) and voice revenue growing 12% YoY and 7% YoY to RM420m and RM1.3b respectively.  

Outlook  Maintained FY12 headline KPIs target (Revenue +5.3% YoY; EBITDA +1.8% YoY) and capex guidance of RM4.4b. 

Raised FY12, FY13 and FY14 core PAT by 6.8%, 6.7% and 5.5% respectively to RM2.63b, RM2.75b and RM2.81b after raising 1) a higher EBITDA margin (42.3% vs. 41.9%) and 2) a higher associate companies contribution.   

Rating  Maintain MARKET PERFORM

Valuation   Inline with the revision in earnings, Axiata TP has been raised to RM5.52 (from RM5.30 previously), based on an unchanged targeted EV/forward EBITDA of 7.1x (+1.5 SD).

Risks  Regulation risks in its overseas ventures.

Source: Kenanga