Period  4Q13/FY13

Actual vs. Expectations Axiata’s FY13 core PATMI of RM2.8b (-0.8% YoY) was broadly in line with our expectation but below consensus, at 95.4% and 92.6% the fullyear estimates, respectively.

Dividends  A 14 sen tax exempt DPS was declared, bringing its full-year DPS to 22 sen (vs. 35 sen in FY12) and implied a payout ratio of 75%.

Key Result Highlights YoY, FY13 revenue rose by 4.1% to RM18.4b driven by higher contribution from all its key operating companies except those in Indonesia. On a constant currency basis, the revenue would have grown 6.7%. Group EBITDA was lower by 2.1% to RM7.3b while margin dipped by 2.5ppt to 39.6% due mainly to the higher operating costs in Indonesia (SMS interconnecting fees and aggressive network costs to accommodate data growth).

 QoQ, the turnover was lower by 5.0% as a result of the lower contribution from XL at the operational level and also due to adverse forex impact. At constant currency, group revenue registered a smaller fall of 1.1%. EBITDA, meanwhile, fell by 10.8% while its margin dipped by 2.5ppt to 37.9%, no thanks to the lower margin recorded in all key OpCos.

 Celcom’s subscribers base fell to 13.1m (vs. 13.5m in 3Q13) as a result of higher subscribers rotational churn in both the prepaid and postpaid segments. Its revenue growth, however, advanced by 4.1% YoY to RM8.0b while its EBITDA margin lowered by 0.6ppt to 43.05%. Data revenue grew by 16% while mobile internet (small and mid-screen) data surged by 57%. Its voice and SMS revenue, meanwhile, declined by 2% and 12%, respectively. The group also closed its highest ever PATAMI at RM2.1b in FY14.

Outlook  Axiata has introduced its FY14 KPIs, where the group targets to achieve revenue and EBITDA annual growth rates of 10.1% and 1.8%, respectively. The targeted EBITDA annual growth rates suggested margin squeeze going forward.

Change to Forecasts Post result, we have lowered our FY14-FY15 core PATAMI forecasts by 2.5% and 3.9%, respectively, after imputing higher operating cost assumptions into our model.

Rating Maintain MARKET PERFORM

Valuation  Lowered our TP for Axiata to RM6.57 (from RM6.72 previously) based on targeted FY14 EV/Forward EBITDA of 9.0x (+1.0 SD).

Risks  Regulation and currency risks in its overseas ventures.

Source: Kenanga