Maybank maintains 'hold' on Axiata, keeps TP of RM6.55

Maybank maintains 'hold' on Axiata, keeps TP of RM6.55
Business & Markets 2013
Written by Shalini Kumar of theedgemalaysia.com
Friday, 28 June 2013 11:37

KUALA LUMPUR (June 28): Maybank IB Research is maintaining its 'hold' rating on Axiata Group Bhd at RM6.61, with a target price of RM6.55 - following news that the group was not a winner in the bids for Myanmar telecom licenses.

The two telecom licenses were awarded to Telenor ASA (DIGI.COM BHD []'s parent company) and Qatar Telecom respectively yesterday. The France Telecom-Marubeni Corp consortium was named as a back-up candidate.

In total, twelve consortiums were shortlisted, of which eleven submitted bids. The initial rollout cost for each licensee is estimated to be at around US$1.5-2 billion

In a note today, Maybank analyst Tan Chi Wei said Axiata was not expected to win a license, so therefore the development did not have an impact on Maybank's forecasts and rating.

"The lack of substantial investment commitment raises the possibility of higher dividends in FY13. Meanwhile, bond yields across the region are rising, and Axiata still faces a challenging operating environment in Indonesia," he said.

"With Myanmar out of the way, the need for Axiata to conserve cash has diminished. We do not rule out the potential for special dividends in FY13, particularly if the acquisition of Axis in Indonesia does not materialize too," he added.

Tan also said that Axiata needed to demonstrate operational improvements at its Indonesian subsidiary, XL Axiata, before Axiata’s share price could be re-rated

"XL’s margins have compressed for three successive quarters, a consequence of its aggressive network investments. Management’s immediate challenge lies in raising utilization (and hence margins) amid a still competitive landscape," hw said.

At 11.19 am, Axiata was trading unchanged at RM6.61, with 6.3 million shares done.