Review

• Excluding the forex and derivative loss of RM140.5mn and other exceptional items, Axiata’s 1HFY24 core profit of RM330.0mn came in within expectations, accounting for 45.0% and 48.1% of ours and consensus’ full-year estimates.

• The group declared a first interim dividend of 5.0sen/share, maintaining the same amount declared in the corresponding period of last year.

• YoY, 1HFY24’s revenue and EBIT grew 7.8% and 42.9% to RM11,418mn and RM1,766mn, respectively. On a constant currency basis, the revenue and EBIT grew 5.2% YoY and 40.0% YoY. All opcos contributed decent revenue growth except Link Net and Dialog. Meanwhile, the stronger EBIT was largely supported by XL, Smart, and Robi from market repair and cost optimisation, as well as decent growth in EDOTCO’s key markets. Together with a higher share of profit from associates, the group’s core profit surged 338.1% YoY to RM330.0mn.

• For XL, the better earnings performance was driven by resilient ARPU and improved contribution from data and digital services. Coupled with savings in infrastructure and sales & marketing costs, the core profit of XL surged 94.1% to RM167mn. Meanwhile, Smart saw its core profit jump 42.3% to RM215mn, thanks to healthy growth in subscribers and ARPU as well as lower direct costs. For Robi, it recorded a core profit of RM65mn (+117.7%), underpinned by data and positive subscriber growth, and cost optimisation measures.

• QoQ, 2QFY24’s revenue grew by 1.7% to RM5,756mn, mainly contributed by infrastructure business. Meanwhile, the group saw the EBITDA grow by 3.2% to RM2,825mn, thanks to higher revenue.

Impact

• Maintain our FY24 and FY26 earnings forecasts.

Outlook

• Pertaining to the recent social unrest in Bangladesh, management revealed that the network shutdowns could have an impact on revenue of about USD10.0mn. Meanwhile, management also highlighted that the recent flood in Bangladesh could be another threat to Robi.

• Despite all the ongoing challenges, especially in Bangladesh, management maintained its headline KPIs: i) revenue growth of mid-single digits and ii) EBIT growth of mid-teens, based on continuing operations. Meanwhile, CAPEX remained guided at RM6.1bn.

Valuation & Recommendation

• After incorporating a 4-star ESG premium based on our latest internal guidelines, we revised the target price from RM2.57 to RM2.65, based on SOTP valuation. Upgrade the stock from Sell to Hold.

Source: TA Research - 29 Aug 2024