KUALA LUMPUR, April 28 ― Kenanga Research has maintained its “outperform” call on Axiata Group with an unchanged sum of parts (SoP)-driven target price (TP) of RM4.40 after its 66.4 per cent-owned unit in Indonesia, PT XL Axiata Tbk (XL) recorded within-expectation results for the first quarter ended March 31, 2021 (1Q21).
The research house said XL’s 1Q21 normalised profit of IDR 230 billion (RM65.1 million) was within the street’s and its expectation, while its revenue of IDR 6.25 trillion also came in within at 24 per cent of Kenanga Research’s full-year estimate.
“XL’s performance is holding up well in the face of fierce competition, and we continue to believe that Axiata’s regional operating companies (OpCos) stand to benefit from subscriber growth, especially in Indonesia and Bangladesh, as they recover from the pandemic,” it said in a note today.
In terms of PT Indosat Tbk and PT Hutchison 3 Indonesia’s merger plan, Kenanga Research said Axiata’s management believed that the exercise would adjust industry competition to a healthy level and help boost telcos' profitability.
“While the combined spectrum of the MergeCo may allow it to provide better services to customers, XL is not fazed as they continue their momentum to penetrate the ex-Java region, and looks to grab market share from MergeCo while they are in discussions,” it said.
Indosat’s parent company, Doha-based teleco Ooredoo Group and Hong Kong-based CK Hutchison Holdings, the parent company of Hutchison 3, inked a memorandum of understanding in December last year to study the potential merger of their telco units in Indonesia.
On Axiata’s portfolio of digital services, Kenanga Research said while it is not all profitable yet, the segment continued to provide the group exposure to promising digital growth opportunities to complement its telecom businesses.
“The Celcom-Digi merger may also bring competition in the Malaysian telecom sector to a healthier and more profitable level, as having one less competitor could help players arrest further average revenue per user (ARPU) declines,” it said.
The research house noted that risks to the “outperform” call included, the proposed Celcom-Digi merger falling through, weaker-than-expected performance at Celcom and regional OpCos, poorer-than-expected costs management, as well as slower-than-expected growth from its digital assets.
At 11am, Axiata’s share slipped five sen to RM3.82 with 176,600 shares traded. ― Bernama
