Review

• Excluding the forex and derivative gain of RM432.9mn and other exceptional items, Axiata’s 9MFY24 core profit of RM551.0mn came in within expectations, accounting for 75.1% and 79.1% of ours and consensus’ full-year estimates.

• YoY, 9MFY24’s revenue and EBIT grew 3.3% and 37.7% to RM16,739mn and RM2,582mn, respectively. On a constant currency basis, the revenue and EBIT grew 3.4% YoY and 38.9% YoY. All opcos contributed decent revenue growth except Link Net and Dialog. Meanwhile, the stronger EBIT was largely driven by all opcos except Link Net. Together with a higher share of profit from associates, the group’s core profit surged 264.4% YoY to RM551.0mn.

• For XL, the improved earnings performance was driven by higher revenue, attributed to marginal subscriber growth and higher blended ARPUs. Combined with cost-saving efforts, XL's core profit surged 39.8% YoY to RM198.0mn. Meanwhile, Robi recorded a core profit of RM113.0mn (+77.6%), driven by data usage growth and cost optimisation measures. On the other hand, Smart saw its core profit jump 32.3% to RM306.0mn, thanks to continuing cost control efforts.

• QoQ, 3QFY24’s revenue fell by 7.5% to RM5,322mn, mainly dragged by lower contributions from all opcos except for mobile operations in Sri Lanka and Digital (Boost). As a result, the group’s EBIT dropped by 13.7% to RM816.0mn.

Impact

• Maintain our FY24 and FY26 earnings forecasts.

Outlook

• The group expects revenue growth to align with headline KPIs, while EBIT growth is anticipated to exceed headline KPIs for FY24. To recap, the group had earlier guided its headline KPIs as i) revenue growth of mid-single digits and ii) EBIT growth of mid-teens, based on continuing operations. Meanwhile, CAPEX is likely to be below the guidance of RM6.1bn.

Valuation & Recommendation

• No change to our target price of RM2.65, based on SOTP valuation and a 3% ESG premium. Maintain a Buy call on the stock

Source: TA Research - 29 Nov 2024