News  Axiata announced that it has entered into an agreement with Samart Corporation Public Company

Limited (Samart) to dispose its entire shareholding of approximately 24% of the total issued and outstanding share capital in Samart i-Mobile Public Company Ltd (Samart i-Mobile) for total gross consideration of approximately USD88.6m.

 Samart holds around 52% of the total issued and outstanding share capital in Samart i-Mobile.

 Samart i-Mobile is in the business of providing instant wireless information services and mobile content, along with the distribution of mobile phones and accessories.

 The SPA is expected to be completed within 30 days from the date of signing.

Comments  We welcome the non-core assets divestment strategy of Axiata as it will allow the group to concentrate on its core businesses going forward.

 Post the divestment in Samart i-Mobile, we understand that Axiata still holds associate stakes in both M1 (28.74%) and Idea Cellular (19.90%).

 The divestment is not expected to have any material financial impact on Axiata given Samart i-Mobile contribution was negligible (<1% to Axiata’s FY13 PBT).

Outlook  Increasing competition, currency fluctuation and regulatory challenges will continue to be key challenges faced by all its OpCos.

 The group has lowered its topline annual growth target to high single digit (from 10.1% YoY previously) in May, partly due to delay of Axis acquisition. Its EBITDA growth, however, is merely expected to grow 1.8% YoY, thus suggesting that the group’s EBITDA margin would be squeezed.

Forecast  We leave our earning's estimates unchanged in view of the negligible impact from this non-core asset divestment..

Rating MAINTAIN MARKET PERFORM

Valuation  Maintained our Axiata TP at RM6.96, based on a targeted FY15EV/forward EBITDA of 9.1x (+1.0x SD above its 4-year mean)

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

Source: Kenanga