AXIATA (6888) : Axiata Group - Celcom yet to regain footing
Target RM7.10 (Stock Rating: HOLD)
Axiata’s 3Q14 core net profit fell 15.2% qoq (-35.4% yoy). This missed our expectations, with 9M14 core net profit at 66%/69% of our/consensus full-year forecast. As expected, no dividends were declared for 3Q14. We cut our FY14-16 core net profit by 8-13% for weaker-than-expected Celcom and associate earnings, plus much higher depreciation. Our SOP-based target price is cut by 1.4% to RM7.10. With rebounds expected at Celcom and XL, we see stronger earnings for Axiata in FY15; though consensus numbers appear to have factored this in. Axiata is now guiding for steady to marginally higher capex in FY15, which is possibly a negative surprise for the market. Still, Axiata is our preferred Malaysian telco pick for its earnings recovery story.
Celcom’s performance should improve from 4Q14 onwards
Celcom’s revenue fell for the third consecutive quarter, by 0.9% qoq (-4.2% yoy), still plagued by IT and network issues. EBITDA margin also fell 1.6% pts qoq (-2.8% pts yoy) due to the booking of USP cost during the quarter. We expect performance to gradually improve from 4Q14 onwards as the telco has launched new prepaid products in mid-Oct after resolving its IT/network issues. New postpaid products are also in the pipeline, to be launched before year-end. Overall, we forecast Celcom’s revenue to fall 3.3% in FY14, then rise 3.0%/2.7% in FY15/FY16, partly driven by the positive GST impact.
XL will take 1-2 quarters to regain momentum
XL’s EBITDA was flat qoq (-8.6% yoy) on soft revenue performance due to the slowdown in 3G network deployment and subscriber churn. In RM terms, EBITDA fell 2.5% qoq (-18.4% yoy). On the positive side, XL has managed to reduce Axis’s standalone opex by 70% since Oct 2013 and is guiding for more network-related cost savings in 4Q14 and 1Q15, after the full shutdown of the Axis network. It aims for Axis to break even at EBITDA level by 1Q15.
More modest performance at Robi and Dialog
In 3Q14, Robi and Dialog posted more modest 0.2% qoq (+3.1% yoy) and 3.8% qoq (+4.0% yoy) EBITDA growth, respectively. Smart’s EBITDA continued to grow strongly 9% qoq. Combined, they make up 21% of group EBITDA vs. 18% a year ago. We believe growth will remain strong due to the generally lower market penetration, although more intense competition could affect growth in Bangladesh in the short term.
Source: CIMB Daybreak - 25 November 2014
Target RM7.10 (Stock Rating: HOLD)
Axiata’s 3Q14 core net profit fell 15.2% qoq (-35.4% yoy). This missed our expectations, with 9M14 core net profit at 66%/69% of our/consensus full-year forecast. As expected, no dividends were declared for 3Q14. We cut our FY14-16 core net profit by 8-13% for weaker-than-expected Celcom and associate earnings, plus much higher depreciation. Our SOP-based target price is cut by 1.4% to RM7.10. With rebounds expected at Celcom and XL, we see stronger earnings for Axiata in FY15; though consensus numbers appear to have factored this in. Axiata is now guiding for steady to marginally higher capex in FY15, which is possibly a negative surprise for the market. Still, Axiata is our preferred Malaysian telco pick for its earnings recovery story.
Celcom’s performance should improve from 4Q14 onwards
Celcom’s revenue fell for the third consecutive quarter, by 0.9% qoq (-4.2% yoy), still plagued by IT and network issues. EBITDA margin also fell 1.6% pts qoq (-2.8% pts yoy) due to the booking of USP cost during the quarter. We expect performance to gradually improve from 4Q14 onwards as the telco has launched new prepaid products in mid-Oct after resolving its IT/network issues. New postpaid products are also in the pipeline, to be launched before year-end. Overall, we forecast Celcom’s revenue to fall 3.3% in FY14, then rise 3.0%/2.7% in FY15/FY16, partly driven by the positive GST impact.
XL will take 1-2 quarters to regain momentum
XL’s EBITDA was flat qoq (-8.6% yoy) on soft revenue performance due to the slowdown in 3G network deployment and subscriber churn. In RM terms, EBITDA fell 2.5% qoq (-18.4% yoy). On the positive side, XL has managed to reduce Axis’s standalone opex by 70% since Oct 2013 and is guiding for more network-related cost savings in 4Q14 and 1Q15, after the full shutdown of the Axis network. It aims for Axis to break even at EBITDA level by 1Q15.
More modest performance at Robi and Dialog
In 3Q14, Robi and Dialog posted more modest 0.2% qoq (+3.1% yoy) and 3.8% qoq (+4.0% yoy) EBITDA growth, respectively. Smart’s EBITDA continued to grow strongly 9% qoq. Combined, they make up 21% of group EBITDA vs. 18% a year ago. We believe growth will remain strong due to the generally lower market penetration, although more intense competition could affect growth in Bangladesh in the short term.
Source: CIMB Daybreak - 25 November 2014
