Period     1Q13 

Actual vs. Expectations    Axiata’s 1QFY13 core PATMI of RM658m (-4.2% YoY) was in line with expectations and accounted for 23.4% and 23.1% of ours as well as the street’s full-year estimates. The lower core PATMI on a YoY basis was mainly due to margin pressure as a result of a lower revenue in XL and higher costs incurred to support its data investment.   

Dividends    No dividend was announced during the quarter.

Key Result Highlights     YoY, the revenue rose 5.5% to RM4.25b driven by higher contribution from all its key operating companies except in Indonesia. On a constant currency basis, the revenue would have grown 8.0%. Group’s EBITDA, however, was lower by 2.4% to RM1.78b while margin dipped by -3.2ppt to 39.7% as a result of higher operating costs in Malaysia (cost associated with the USP claw-back and devices costs), Indonesia (SMS interconnect fee and aggressive network costs to accommodate data growth) and Bangladesh (regulatory costs). The lower margin led the group to record a lower core PATMI of RM658m (-4.2%). 

QoQ, the turnover was up marginally by +0.7% while the EBITDA margin decreased by -1.9ppt to 39.7% as a result of higher network costs, subsidy costs on SIM tax and the consolidation of a newly acquired entity cost in Cambodia.    

Celcom continued to perform with its revenue growing 4.5% YoY to RM2.0b while its EBITDA margin was sustained at 44% in 1Q13. Broadband grew 19% YoY to RM256m with advanced data (excluding SMS) up by 13% YoY to RM474m.  

Outlook    There were no changes in the group’s FY13 KPIs, where Axiata is targeting to achieve revenue and EBITDA annual growth rates of 7.6% and 0.2% respectively.   

Change to Forecasts      We are maintaining our FY13-FY14 earnings forecast for now pending today’s post-results briefing. Based on our preliminary analysis, we do not expect to see any material changes in our earnings forecasts.    

Rating    Maintain MARKET PERFORM

Valuation     Maintaining our Axiata TP at RM6.95 based on a targeted FY14 EV/Forward EBITDA of 8.4x (+1.5 SD).

Risks    Regulation risks in its overseas ventures.

Source: Kenanga