AXIATA’s 1QFY22 CNP is in line with most its OpCos reporting improved top-line, and will be driven by continued data growth and acquisition to drive earnings growth. Post results, we maintain our FY22 earnings estimates, which sits closely with management’s unchanged guidance. We maintain our OP call and TP of RM4.25, supported by an attractive dividend yield of c. 4%.

In line. 1QFY22 saw a LATAMI of RM43m primarily due to forex losses. However, on a normalised basis, CNP of RM370m is in line with our/market estimates, accounting for 29%/30% of respective forecast full-year forecasts. A DPS of 5.5 sen was declared which we deemed in line.

YoY, revenue improved by 7% to RM6.5b, underpinned by strong growth on all fronts with the exception of Nepal (-10% to RM340m). Nepal was impacted by reduced domestic interconnect rate coupled with decline in ILD. Edotco saw stellar performance at +37% to RM256m – on account of Touch Mindscape acquisition and organic growth namely from Bangladesh and Pakistan - followed by XL at RM1,967m (+10%) on higher data revenue and ARPU. In terms of top-line contribution XL maintained its lead, contributing 30% followed by CELCOM (26%) while Nepal’s contribution eroded by 90bps to 5%. While Group EBITDA margin saw slight improvement by 40bps, EBITDA saw an 8% uptick to RM2.9b, underpinned by strong contribution from CELCOM (+15%) and EDOTCO (+30%). However, EBITDA contribution was led by XL underpinned by strong EBITDA margin of 48% vs. CELCOM at 45%. LATAMI of RM43m was underpinned by forex losses of RM416m. On a normalised basis, CNP improved 69% to RM370m.

QoQ, top-line fell 6%, dragged by all OpCos (with the exception ofvEdotco at +15%) – noticeably dragged by Nepal (-6%) and CELCOM (-5%) – affected by lower prepaid & postpaid revenue and lower device sales.

Moving forward, AXIATA has a lot going for it in its regional and digital businesses; acquisition of PLDT towers to become the leading independent TowerCo in the Philippines, Boost & RHB consortium securing a digital banking license, acquisition of Hipernet Indodata by XL, LinkNet acquisition and corresponding MTO expected to be completed by 3QCY22 with CELCOM Digi merger expected to be completed in the same period.

Guidance. No change in management’s guidance of FY22 revenue growth of mid-single-digit and EBIT growth of high-single-digit with capex maintained at RM7.1b. Post results, we maintain our FY22E CNP as it closely aligns with management’s FY22 guidance.

Maintain OUTPERFORM with unchanged TP of RM4.25 based on FY22E Enterprise Value of RM62.5b. The strong external performance reinforces our view that AXIATA has a lot going for it in its regional and digital businesses, making the stock a good hedge against the uncertain operating environment for local MNOs. At current price level, dividend yields are looking attractive at c. 4%.

Source: Kenanga Research - 26 May 2022