Period    3Q12/9H12 

Actual vs.  Expectations   The 9M12 core NP of RM2.1b was better than expectations and accounted for 79.9% and 79.0% of ours and the street's full-year estimates. The higher core NP was mainly due to the 1) higher turnover growth in its key operating companies; 2) higher associates contributions and 3) a lower effective tax rate as a result of tax credits from both Celcom and Dialog.  

Dividends   No dividend was declared during the quarter. 

Key Result Highlights    YoY, the revenue rose 8.6% to RM13.2b, driven by higher contributions from all its key operating companies ('OpCos'). On a constant currency basis, the revenue would have grown 12.2%. EBITDA grew 4.9% but its margin dipped by 150bps to 42.1% mainly due to a one-off SIM tax in Robi along with aggressive network roll-out costs in Indonesia to accommodate data growth. The core NP, however, increased by 9.1% to RM2.1b thanks to higher operational contributions from key OpCos but was partially offset by forex losses in Indonesia and Sri Lanka, and a lower effective tax rate (23.1% vs. 27.5%). 

 QoQ, the turnover was up 2.8% while the core NP grew by 1.7% as a result of higher operational costs in both XL (higher interconnect fees) and Robi (one-off SIM tax). The EBITDA margin fell to 40.6% vs. 43.5% in 2Q12.      

 Celcom continued to perform with its 9M12 revenue surging by 8% YoY to RM5.7b, although this was at a lower EBITDA margin of 43.0% vs. 43.6% in 9M11. Broadband grew 19% YoY to RM678m with the total data (including SMS) and voice revenue growing 8% YoY each to RM2.0b and RM3.7b respectively. 

Outlook   Axiata maintained its FY12 headline KPI targets i.e. (i) Revenue +5.3% YoY, and (ii) EBITDA +1.8% YoY but had raised its capex guidance to RM5.0b from RM4.4b previously. 

Change to Forecasts We have raised our FY12 (2.8%), FY13 (1.1%), and FY14 (1.3%) core NPs after fine-tuning and raising the associates' contribution. 

   

Rating  Maintain MARKET PERFORM

Valuation    We have lowered our Axiata's TP to RM6.10 (from RM6.33 previously) based on a lower targeted +1.5 standard deviation (from +2SD previously as a result of regulation headwinds ahead), which implied a FY13 EV/forward EBITDA of 7.5x. 

Risks   Regulation risks in its overseas ventures.

Source: Kenanga