Period    4Q12/FY12 

Actual vs.  Expectations   Axiata's FY12 core PATMI of RM2.8b (+9.7% YoY) was in line with expectations and accounted for 102.1% of ours as well as the street's full-year estimates. The higher core PATMI YoY was mainly due to the 1) higher turnover growth in its key OpCos; 2) higher associates contributions and 3) a lower effective tax rate as a result of tax credits from both Celcom and Dialog.  

Dividends   Proposed a final DPS of 15 sen and a surprise special dividend of 12 sen, bringing the total full year DPS to 35 sen (vs. our 21 sen estimate). 

Key Result Highlights    YoY, Axiata's FY12 revenue rose 7.4% to RM17.6b, driven by higher contributions from all its key operating companies (OpCos). On a constant currency basis, the revenue would have grown 11.7%. EBITDA grew 1.8% but its margin dipped by 130bps to 42.1% mainly due to a one-off SIM tax in Robi along with the company's aggressive network rollout costs in Indonesia to accommodate data growth. The core PATMI, however, increased by 9.7% to RM2.8b thanks to: 1) the higher operational contributions from its key OpCos although this was partially offset by forex losses in Indonesia and Sri Lanka, and 2) a lower effective tax rate (23.5% vs.24.2%).   

 QoQ, the turnover was lower by 2.2% while the core PATMI dipped by 19.6% as a result of the higher operational costs in both XL (higher interconnect fees) and Robi (one-off SIM tax). The EBITDA margin improved to 41.6% vs. 40.6% in 3Q12.      

 Celcom continued to perform with its FY12 revenue surging by 7% YoY to RM7.7b, although this was at a lower normalised EBITDA margin of 44.6% vs. 45.2% in FY11. Broadband grew 20% YoY to RM927m with the total data (including SMS) and voice revenue growing 10% and 5% YoY to RM2.7b and RM6.8b respectively. 

Outlook   Axiata has introduced its FY13 KPIs, where the group targets to achieve revenue and EBITDA annual growth rates of 7.6% and 0.2% respectively.  

Change to Forecasts  We have raised our FY13 (1.9%) and FY14 (2.4%) core PATMIs after fine-tuning and lowering our EBITDA assumptions as well as interest cost.    

Rating    Maintain MARKET PERFORM

Valuation    Raised our Axiata TP to RM6.86 (from RM6.78 previously), which is based on a targeted EV/forward EBITDA of 8.7x, implying an unchanged +2SD from the mean. 

Risks   Regulation risks in its overseas ventures.

Source: Kenanga