KEY INVESTMENT HIGHLIGHTS

• Double digit growth in FY19 EBITDA to RM9,311.0m in view of higher contribution from all opcos except NCELL

• However, the positivity only translate into minimal impact on the group’s FY19 earnings (+1.5%yoy)

• FY19 dividend maintain at 9.5sen per share which translate into dividend yield of 2.2%

• Propose listing of Robi is expected to have minimal impact on the group

• Upgrade to BUY with a revised TP of RM4.77

Cost excellence programme continue to yield result. Axiata Group’s Bhd 4QFY19 EBITDA came in +13.6%yoy higher at RM2,368.0m. This was mainly attributable to the cost excellence programme as 4QFY19 revenue remained flat at RM6,267.0m. Higher EBITDA was achieved across all opcos with the exception of Dialog and NCell.

FY19 EBITDA within expectation. Cumulatively, full year FY19 EBTIDA amounted to RM9,311.0m, an increase of +11.7%yoy. This was higher than the group’s guidance for FY19. Nonetheless, it was within ours and consensus expectations, accounting for 104.7% and 96.5% of full year FY19 EBITDA estimates

Marginal earnings improvement. Meanwhile, FY19 normalised earnings totaled up to RM1,025.0m, a slight increase of +1.5%yoy. Despite double digit growth in EBITDA, the earnings was partially subdued mainly by higher finance cost (+13.4%yoy).

Capital spending. FY19 capex came in marginally higher at RM6,202m. The increase in capex primarily came in primarily came from XL and Ncell which grew by +12.6%yoy and +273.2%yoy to RM2,361m and RM571m.

Impact. Premised on the group’s guidance on future financial performance, we revise upwards FY20 and FY21 EBITDA to RM9,698.4m and RM9,944.8m. Consequently, FY20 and FY21 earnings estimates has been raise to RM1,103.7m and RM1,145.1m respectively.

Target price. We are revising our target price of RM4.77 (previously RM4.68). This is premised on pegging FY20 EBITDA to revised EV/EBITDA multiple of 6.4x which is the group’s two year historical average multiple.

Source: MIDF Research - 24 Feb 2020