AXIATA’s 1QFY23 results disappointed due to higher-than-expected depreciation and finance costs, and lower-than-expected contribution from CelcomDigi Berhad. Operationally, both revenue and EBITDA met expectations, thanks to its resilient subscribers and ARPU said Kenanga Investment on the group’s latest earning result.
The house is rationalising down its FY23-24F earnings forecasts by 28% and 33% and lowering its TP by 2% to RM4.18 (from RM4.27) but maintains its OUTPERFORM call.
1QFY23 core net profit of RM83m disappointed, accounting for only 7% each of both our full-year forecast and the full-year consensus estimate. The variance against our forecast came largely from the higher-than-expected depreciation and amortisation, finance costs, and lower-than-expected contribution from CDB. As expected, no dividend was announced for this quarter.
Year on Year (after discontinuing Celcom’s operations), 1QFY23 revenue improved 8% (accounting for 25% of our full-year
estimates), underpinned by a strong recovery in domestic and regional operations Revenue was underpinned by specifically Edotco (+21%), Dialog (Sri Lanka) at 31%, Robi (Bangladesh) at 16% and XL Axiata (Indonesia) at 12%. EBITDA growth outpaced revenue at 9% (accounting for 24% of the research house’s full-year estimates) led by Edotco (19%), Robi at 24% and XL at 13%. PATAMI rebounded to RM74m with Robi and Smart (Cambodia) being the main driver, growing at 34% and 86%, respectively, supported by the absence of Cukai Makmur, lower taxes, and forex losses. PATAMI was also
moderated by share of results of CDB, lower than the PATAMI contribution of Celcom as a subsidiary in 1QFY22.
Its mobile subscription continued to be resilient across all of Axiata’s telcos with Dialog leading the way, growing 7% YoY but down 1% QoQ, followed by Robi at +3% YoY and +2% QoQ. Similarly, blended ARPU saw improvement or stayed stable across all its operating companies, with the exception of Ncell which saw a 3 nd consecutive quarterly drop (2%) to RM176 on account of inflationary pressure and a reduction in domestic rates.
The house continues to like AXIATA for (i) its strong foothold in the growing telco markets in the region, (ii) its dominant position in the telco tower sector in the region via edotco, and (iii) the strong execution of its M&A strategy, having concluded major acquisitions in Indonesia and the Philippines recently. Maintain OUTPERFORM.
Risks to the call include: (i) unfavourable terms with regard to the 5G roll-out in Malaysia, and (ii) risks associated with overseas operations.
