News

Axiata plans to invest $11.25m (c.RM44m) for the acquisition of an entire stake of Komli Asia Holding Pte Ltd (Komli Asia) via its indirect subsidiary, AdKnowledge Asia Pacific Pte Ltd (APAC).

Founded in 2006, Komli is Asia Pacific’s leading digital media technology platform specialising on digital marketing, performance advertising, social media, brand solutions or advertising, search marketing and video solutions.

Komli was incorporated in the State of Delaware with a principal office located in New York, USA. Headquartered in Mumbai, Komli has offices in Bangalore, Chennai, New Delhi, Hong Kong, Manila, Singapore, Melbourne and Sydney.

Management believes the acquisition could further diversified revenue and provides a strong strategic fit across digital advertising verticals such as social, video, display and mobile.

The purchase consideration will be funded through internally generated funds.

Comments

We concur with the management and believe the acquisition-Komli Asia could provide a compelling strategic opportunity for APAC to scale up its digital media presence and operations in South East Asian region. Meanwhile, we also believe that there could be some synergistic benefits to be created via its recent $2.6m investment in WSO2T, an open-source application development software company.

In view of the relatively small investment, the acquisition is not expected to have any material impact to the group’s FY15 earnings.

Outlook

Increasing competition, currency fluctuation and regulatory challenges will continue to be key challenges faced by Axiata’s OpCos.

Forecast

We leave our FY15-FY16 earnings estimates unchanged.

Rating

MAINTAIN MARKET PERFORM

Valuation

We maintain our TP of RM6.55, based on an unchanged targeted FY16EV/forward EBITDA of 9.2x (+0.5x SD above its 4-year mean).

Risks to Our Call

Regulation and currency risks in its overseas ventures.

Source: Kenanga Research - 10 Aug 2015