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KUALA LUMPUR, April 14 — AmInvestment Bank Bhd (AmInvest) has reiterated its “buy” call on Axiata group with an unchanged sum-of-parts-based fair value of RM4.50 per share after the company’s proposed deal with peer Digi.
In a research note today, AmInvest said the merger would bring equal benefits to both as Axiata and Telenor will have equal stakes of 33.1 per cent each in the merged entity called Celcom Digi, with the balance to be held by Digi’s minority shareholders.
“It is also equally important to look at the free cash flow generating ability of the entities to arrive at fair valuations. We believe Digi’s structurally stronger cash generative attributes, versus those of Celcom, should bridge the perceived valuation gap between the two by the market.
Looking from earnings dilution versus merger synergies, the firm said Axiata may initially suffer earnings dilution from the exercise and it believes that this would eventually be more than offset by potential synergies from cost optimisation, reengineering network operations, reduced redundancies and procurement rationalisation.
At 11.05am, Axiata down three sen to RM3.84 with 620,000 shares transacted, while Digi down four sen, to RM4.29 with 489,200 shares changing hands. — Bernama