RHB Research has maintained a “Buy” recommendation for Axiata Group Bhd with a higher target price of RM5.03 from RM4.84.
It said that the earnings recovery momentum remains intact, with further re-rating catalysts hailing from the completion of the domestic mobile merger, dividend upside, and value-accretive M&As
The research house said that Axiata is confident of bagging a digital banking license (recipients to be announced by end-March).
RHB said that the management said the addressable market for digital lending of >MYR40bn (Malaysia’s unbanked and under-banked segments) is consistent with the target set by Bank Negara over five years, for which there is an upside.
RHB said that management does not rule out additional M&As within the digital financial services and enterprise verticals to further scale up and grow the segments. The enterprise segment currently makes up 7-8% of group revenue, with Axiata looking to raise this to 20% by FY24F.
It said that 4Q21 core earnings gained 4.4% QoQ on stronger EBITDA and seasonality, partially offset by higher tax expense. “This brought YTD core earnings to MYR1.33billion The variation against our estimates came from lower-than-expected depreciation expenses and digital losses,” it said.
RHB said that the overall, recovery momentum remains intact, with most mobile assets (except Ncell; See Fig. 2) exhibiting healthy EBITDA growth. A FY21 DPS of 9.5 sen (FY20: 7 sen) translates into a 66% payout.
It said that Axiata’s 2022 guidance is for EBIT growth (high single-digit) to eclipse revenue growth (mid-single-digit). This excludes the Digi-Celcom merger and the recent acquisition of LinkNet (LINK IJ, NR). Post results call, we raise FY22-23F core earnings by 2-3% and introduce FY24F numbers.
