Period

4Q15/FY15

Axiata’s FY15 core PATAMI of RM2.1b (-8.3% YoY) came in below expectation, constituting only 91%/90% of our/consensus’ full-year estimate. Note that the full-year core PATAMI is after excluding the RM400m net gain from XL’s towers disposal and RM83m forex gain. On our end, the key negative deviation was mainly due to higher-than-expected effective tax rate and non-controlling interests.

Axiata has failed to achieve its FY15 KPIs (a 4% YoY growth in both revenue and EBITDA at a constant currency basis) and delivered -0.2%/-2.2% YoY growth in revenue/EBITDA.

Dividends

Declared 12.0 sen dividend, bringing its full year DPS to 20.0 sen (FY14: 22.0 sen), translating into a payout ratio of 85%.

YoY, FY15 revenue improved by 6% mainly driven by higher contribution from XL, Dialog, Robi and Smart, partially offset by the lower revenue from Celcom (-5%). On a constant currency basis, the revenue growth rate would have declined by 0.2%.

Group EBITDA, meanwhile, inched higher by 4% to RM7.3b while margin dipped by 80bps to 36.6%, no thanks to higher operating costs in Celcom. PATAMI, however, surged 8% mainly due to recognition of one-off gain of RM400m from disposal

of towers in XL recognized in 3Q15.

 

QoQ, the turnover was higher by 6% due to higher contribution from XL and Robi. EBITDA improved by 5.4% while its margin was relatively stable at 36.6%. PATAMI, however, dipped 48% due to the absence of one-off disposal gain.

Celcom’s service revenue dipped by 6.8% YoY (to RM6.7b) in FY15 as a result of the heightened competition. Total subscribers base, meanwhile shrunk to 12.2m (vs. 13.0m a year ago) after losing 259k net subscribers’ add in 4Q15. Its EBITDA weakened by 13% to RM2.7b in FY15 with margin softening to 37.0% vs. 40.3% in FY14.

Outlook

Axiata has introduced its FY16 KPIs, where the group targets to achieve revenue/EBITDA annual growth rates of 12.2%/16.0% (based on 1USD=RM4.20). Its capex, meanwhile, is expected at RM5.7b (FY14: RM4.9b). Note that, the FY16 KPI included the consolidation of Ncell in 2H16 but excluding the Robi-Airtel merger.

Lowered our FY16 EBITDA by 1.4% after taking management’s latest guidance into the consideration. FY16 core NP, meanwhile, is reduced to RM2.6b (-4%) after raising the MI estimate. Meanwhile, we also take this opportunity to introduce our FY17E numbers.

Rating

Downgrade to MARKET PERFORM

Valuation

Lowered Axiata’s TP to RM6.10 (from RM6.30 previously) based on targeted FY16 EV/fwd. EBITDA of 7.9x, representing an unchanged -1.0x SD below its 4-year mean.

Risks

Regulation and currency risks in its overseas ventures.