AXIATA (6888) AXIATA GROUP BERHAD
KUALLA LUMPUR: CIMB Equities Research sees stronger earnings for Axiata Group following rebounds in its units Celcom and XL but consensus numbers appear to have factored this in.
It said on Monday that on the negative side, Axiata was likely to keep its capex high in FY15 to improve its data network quality, which could surprise the market.
“We cut our FY14-16 core net profit forecasts by 1.8%-11.0% for lower estimates for Celcom and XL. Despite this, our sum-of-parts based target price stays at RM7.20 as we now factor in higher valuations for Idea, Robi and Smart. We maintain our Hold call,” it said.
CIMB Research said the key upside risk is stronger-than-expected earnings at Celcom and XL while the key downside risk is sustained high capex in the medium term.
“We expect Celcom’s EBITDA to rebound 5.3% in FY15 (FY14F: -4.4%),” it said.
Underpinning the growth would be a) new product launches after fixing its IT/network issues, b) positive GST impact, and c) healthy growth in data revenues, given a more visible pick-up in usage among its subscribers in recent quarters.
For XL, it forecasts EBITDA to recover 7.8% (FY14F: -0.4%) on a) strong growth in data, b) rising tariffs and c) cost rationalisation at Axis even though margin improvement will be held back by the additional tower leaseback cost from SUPR.
“Overall, we forecast group EBITDA growth of 6.6% in FY15 and 8.1% in FY16 (FY13/14F: -2.7%/-0.5%).
“We believe Axiata needs to sustain high network investments for all its operating subsidiaries in FY15 to remain competitive as a good data experience is increasingly important to subscribers.
“As such, we raise our FY15 capex assumption by 16% to RM4.4bn (capex/sales: 22%), which is marginally higher on-year. Thereafter, we forecast capex to ease on-year to RM3.9bn in FY16 (capex/sales: 19%).
“With the higher capex, we forecast free cash flow per share to come in at only 14 sen to 17 sen in FY14-15, before rising to 30 sen in FY16,” it said.
CIMB Research said despite that, it believes Axiata will still be able to raise its dividend payout ratio gradually to 80-90%, translating into dividend per share (DPS) of 26 sen to 32 sen (yield: 3.6-4.5%) in FY14-16.
“This is because it has RM3.2bil cash sitting at the holding company/Celcom level at end-June 2014, with sufficient room in the balance sheet to gear up.
“Based on our DPS forecast, Axiata’s net debt/EBITDA is set to rise from 0.97 times at end-FY13 to a still-manageable 1.07 times/1.13 times at end-FY14/FY15, before easing to 1.07 times by end-FY16,” it said.
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