News  Axiata announced that its chief financial official James Maclaurin will be stepping down by year-end to head a new unit that manages the group’s infrastructure assets.

 Mr. Maclaurin will be chief executive of e.co, the new strategic business unit, while Chari TVT, the finance chief of Axiata unit Celcom, will take over as Axiata’s CFO.

 Joining James will be Nashad Emir and Thivanka Rangala, who will become the new unit chief operating officer and chief financial officer, respectively.

 E.co will own and manage the passive network infrastructure of the Axiata Group as a business entity and will have subsidiaries in most of its operating company’s countries.

Comments  The move is one step closer to unlock its shareholders’ value and enhance its operating efficiency, where Axiata has previously highlighted during the recent investor day that they will form an independent tower company to manage its tower assets in operating companies (except XL).

 The group has an existing portfolio with over 19k towers with presence in five countries across Asia.

Being independently managed, Axiata estimated that an annual OPEX reduction of more than 5% can be achieved while its capex can be reduced by approximately 20%-30%.

 No structure guidance was provided by the management for its widely-expected tower asset IPO.

Outlook  The group’s data business is expected to continue to be its main growth driver in the next few years, especially in the more mature markets.

 Axiata’s consolidation and market ‘rebalancing’ strategy in some OpCos countries (i.e. Cambodia) is expected to start bearing fruits. Nevertheless, heightened competition and cost pressure (mainly from product pricing, SMS interconnection rates and continuing data network investments) have put XL’s profitability under pressure.

Forecast  No changes in our FY13-FY14 earnings forecasts.

Rating Maintain MARKET PERFORM

Valuation  Maintaining our target price at RM6.70 based on an unchanged targeted FY14 EV/forward EBITDA of 8.5x (+1.0SD).

Risks to Our Call Regulation risks in its overseas ventures.

Source: Kenanga