Period    9M12 for XL Axiata

 The 9M12 core NP of Rp2.3T was below our expectations and accounted for 67.3% and 66.6% of ours and the street's full-year  estimates, respectively.

Dividends   No dividend was announced during the quarter.

 The 9M12 revenue rose 14% YoY to Rp15.9T, driven by higher contribution from the SMS (+21%), Data & VAS (+14%) and Voice (+7%) segments. With the growth in data, non-voice revenue now contributed half of XL's total usage revenue of Rp14.6T. The strong data growth has led XL's total data traffic to surge 144% to 16,337 TB. XL's data users now accounted for 60% of the group's total subscribers of 42.3m with most of the users committed to either the Pay Per Use or Volume based data plans. 

 QoQ, the revenue was up by +18% while core net profit rose slower than the top line to Rp761m (+11%) as a result of a lower EBITDA margin (44.1% vs. 47.0%) due to higher network costs.  

 The total operating expenses, meanwhile, increased by 23% YoY to Rp8.3T in 9M12 due to higher infrastructure expenses of Rp3.9T(+43% YoY) caused by the increase in rental sites, towers and leased lines expenses as a result of a higher base stations rollout and higher 3G infrastructures. 

 The 9M12 EBITDA increased by 6% YoY to Rp7.4T although the margin was lower at 46.6% vs. 50.3% a year ago. The lower margin was mainly due to higher network costs related to the expansion of data infrastructure to support data growth and SMS interconnection.

Outlook   XL Axiata is maintaining its targeted revenue to be within or above its peers' expected growth in FY12 of 6.0%-8.0%. Meanwhile, while management said it is keeping its guidance of an EBITDA targeted margin in the high 40% level, it is, nonetheless, expecting the margin pressure to increase going forward as a result of higher data contribution. 

 No change in our Axiata's FY12-FY14 forecast for now, pending on the upcoming 3QFY12 result which scheduled to release on 29 Nov. 

Rating  Maintained at MARKET PERFORM

Valuation    Our Axiata TP is maintained at RM6.33 based on a targeted EV/forward EBITDA of 7.7x (+2 SD).

Risks   Regulation risks in its overseas ventures.