Period  3Q13/9M13

Actual vs.Expectations Axiata’s 9M13 core PATMI of RM2.1b (+0.6% YoY) came in within expectations and accounted for 73.8% of our and 73.3% of the street’s fullyear estimates.

Dividends  No dividend was declared during the quarter.

Key Result Highlights YoY, Axiata’s 9M13 revenue rose by 4.8% to RM13.8b driven by higher contribution from all its key operating companies except those in Indonesia. On a constant currency basis, the revenue would have grown 7.0%. Group EBITDA was lower by 1.2% to RM5.5b while margin dipped by 2.5pp to 40.1% due mainly to the higher operating costs in Indonesia (SMS interconnects fee and aggressive network costs to accommodate data growth). PATAMI was RM2.1b growing by 1.7%. At a constant currency basis, it would have been higher at 2.3%.

 QoQ, the turnover improved by 2.5% driven by sustained operational improvements in all key OpCos. EBITDA improved by 3% while its margin increased marginally by 1pp to 40.4%.

 Celcom’s subscribers continue to growth with net adds of 533k, bringing its subscribers base to 13.5m. Its revenue growth, however, was flat at RM2b as opposed to the preceding quarter due mainly to the lower voice and SMS revenue (affected by the usage of OTT) but offset by higher data revenue contribution. Its margin, meanwhile, was sustained at 44.5% while PATAMI registered a slight decline to RM568m due to lower net finance income.

Outlook  Management is now expecting its FY13 revenue annual growth rate to come in slightly lower than its previous 7.6% guidance. EBITDA growth, meanwhile, is expected to face some pressure vs. 0.2% growth target previously while CAPEX is expected to come in slightly lower than the earlier RM4.5b estimate.

Change to Forecasts Post result, we have fine tuned our FY13-FY14 core PATAMI forecasts by 0.7% each.

Rating Maintain MARKET PERFORM

Valuation  Raised our TP for Axiata marginally to RM6.73 (from RM6.70 previously) based on an unchanged targeted FY14 EV/Forward EBITDA of 8.5x (+1.0 SD).

Risks to Our Call Regulation and currency risks in its overseas ventures.

Source: Kenanga