AXIATA (6888) - Axiata Group - Recovery to be delayed slightly
Target RM7.00 (Stock Rating: HOLD)
Axiata’s 4Q14 core net profit fell 13.7% qoq (-20.8% yoy) on weaker earnings from Celcom, Dialog and Robi. This was in-line with FY14 at 96% of our forecast (consensus: 91%). A final 14.0 sen DPS was declared, bringing full-year DPS to 22.0 sen. This was 4% lower than our estimate, although payout ratio rose to 84% (FY13: 75%). We cut our FY15/16 net profit forecasts by 11.5%/8.4% to factor in some delays to Celcom’s earnings recovery and higher depreciation, and trim our SOP-based target price by 2.7% to RM7.00. Maintain Hold. We still see stronger earnings for Axiata in FY15-16 with rebounds at Celcom and XL; consensus numbers appear to have factored this in. For ASEAN telcos, we prefer Telkom Indonesia, Singtel and Thaicom.
Expect stronger Celcom performance in 2H15
Celcom’s revenue rose modestly by 1.1% qoq (-3.1% yoy), after generally declining since 4Q13. This was supported by the launch of new pre- and post-paid products during the quarter. Normalised EBITDA margin rose 0.8% pts qoq (-1.1% pts yoy) due to higher revenues and cost management, while 3Q14 was negatively impacted by the booking of USP cost. Due to the negative impact from the East Coast floods and some delays to the completion of its IT system upgrade project, a revenue turnaround at Celcom will likely be delayed to 2Q/3Q15. Overall, we forecast Celcom’s revenue to recover by 2.0%/3.0% yoy in FY15/16, including the positive impact from GST.
XL’s revenue growth could pick up from 2Q15 onwards
Headline EBITDA grew 11.6% qoq (+2.6% yoy). Excluding reversals on accruals made in preceding quarters, EBITDA grew more modestly by 3.6% qoq (-4.7% yoy). Margin improved by 2% pts qoq to c.36% due to network cost savings from the shutdown of duplicate Axis sites and some contract renegotiations. For FY15, we expect adjusted EBITDA (after tower lease payments) to recover by 5.2% before posting stronger growth of 13.4% in FY16.
Modest FY15 key performance indicators
For FY15, Axiata expects 4.0% growth in revenue (FY14: +1.9%) and EBITDA (FY14: -3.7%), ROIC of 8.7% (FY14: 9.0%) and ROCE of 7.7% (FY14: 7.6%). Axiata budgets a higher capex of RM4.8bn (FY14: RM4.0bn) due to some capex brought forward from FY14 and data network investments across its operating markets.
Source: CIMB Daybreak - 26 February 2015
Target RM7.00 (Stock Rating: HOLD)
Axiata’s 4Q14 core net profit fell 13.7% qoq (-20.8% yoy) on weaker earnings from Celcom, Dialog and Robi. This was in-line with FY14 at 96% of our forecast (consensus: 91%). A final 14.0 sen DPS was declared, bringing full-year DPS to 22.0 sen. This was 4% lower than our estimate, although payout ratio rose to 84% (FY13: 75%). We cut our FY15/16 net profit forecasts by 11.5%/8.4% to factor in some delays to Celcom’s earnings recovery and higher depreciation, and trim our SOP-based target price by 2.7% to RM7.00. Maintain Hold. We still see stronger earnings for Axiata in FY15-16 with rebounds at Celcom and XL; consensus numbers appear to have factored this in. For ASEAN telcos, we prefer Telkom Indonesia, Singtel and Thaicom.
Expect stronger Celcom performance in 2H15
Celcom’s revenue rose modestly by 1.1% qoq (-3.1% yoy), after generally declining since 4Q13. This was supported by the launch of new pre- and post-paid products during the quarter. Normalised EBITDA margin rose 0.8% pts qoq (-1.1% pts yoy) due to higher revenues and cost management, while 3Q14 was negatively impacted by the booking of USP cost. Due to the negative impact from the East Coast floods and some delays to the completion of its IT system upgrade project, a revenue turnaround at Celcom will likely be delayed to 2Q/3Q15. Overall, we forecast Celcom’s revenue to recover by 2.0%/3.0% yoy in FY15/16, including the positive impact from GST.
XL’s revenue growth could pick up from 2Q15 onwards
Headline EBITDA grew 11.6% qoq (+2.6% yoy). Excluding reversals on accruals made in preceding quarters, EBITDA grew more modestly by 3.6% qoq (-4.7% yoy). Margin improved by 2% pts qoq to c.36% due to network cost savings from the shutdown of duplicate Axis sites and some contract renegotiations. For FY15, we expect adjusted EBITDA (after tower lease payments) to recover by 5.2% before posting stronger growth of 13.4% in FY16.
Modest FY15 key performance indicators
For FY15, Axiata expects 4.0% growth in revenue (FY14: +1.9%) and EBITDA (FY14: -3.7%), ROIC of 8.7% (FY14: 9.0%) and ROCE of 7.7% (FY14: 7.6%). Axiata budgets a higher capex of RM4.8bn (FY14: RM4.0bn) due to some capex brought forward from FY14 and data network investments across its operating markets.
Source: CIMB Daybreak - 26 February 2015
