Maybank Investment Bank Bhd (Maybank IB) has maintained its “buy” call on Axiata Group Bhd, with a lower RM3.70 SOP-based target price (TP).
In a research note today, Maybank IB said integration costs and accelerated depreciation at CelcomDigi Bhd, along with continued headwinds at op-cos, could potentially result in a new low for Axiata’s net profit in the financial year 2023 (financial year2023).
“Nevertheless, we expect a reversion to growth in financial year 2024, and with management focusing on balance sheet repair and being open to asset monetisation, the overall risk-reward remains positive in our view,” said the research firm.
Meanwhile, Maybank IB has lowered its financial year 2023/2024 CelcomDigi net profit forecast by 26 per cent and 15 per cent respectively, as it incorporates higher depreciation assumptions.
“With network consolidation now underway, circa 25 per cent of CelcomDigi’s cumulative, more than 23,000 sites could potentially be decommissioned in the next two to three years and this would likely result in elevated depreciation charges during this period,” it said.
The research house said its previous depreciation and amortisation (D&A) assumptions for the first two years of the merger appear conservative, given the likely accelerated decommissioning of network sites.
“We have raised our D&A assumptions, which results in lower net profit and dividend. Merger synergies are significant but back-loaded.
“Therefore, Maybank IB maintains a ‘hold’ recommendation on CelcomDigi with an unchanged discounted cash flow-based TP of RM4.60,” the research house said.
