HwangDBS maintains Axiata "fully valued", TP RM5.90

HwangDBS maintains Axiata "fully valued", TP RM5.90
Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Friday, 05 July 2013 12:02

KUALA LUMPUR (July 5): HwangDBS Vickers Research has kept its “fully valued” recommendation on Axiata Group Bhd, despite the latter’s announcement that its Malaysian subsidiary has tied up with billionaire Tan Sri Syed Mokhtar Albukhary’s company to share their spectra for Fourth Generation Long-Term Evolution (4G-LTE) connection.

In a note today, the research house also kept its target price of RM5.90 on Axiata. However, the telecommunications giant shares crept up one sen or 0.15% to RM6.60 as of 11:44 am.

HwangDBS said it is a positive move on Axiata’s Celcom part to tie-up with Altel Communications Sdn Bhd, as the former would now have more leeway to offer higher LTE speed and have greater capacities.

Nonetheless, the research house said this deal between Celcom and Altel still does come with its side effect.

“This (collaboration agreement) adds an additional competitor into an already saturated market under challenging operating conditions. Puncak Semangat (Altel’s parent) would likely have to offer services at competitive rates to grab some subscription market share, which would also dilute the incumbents’ subscription growth as well as revenue growth.

“The larger operators would likely need to rely more than ever on increasing usage of data, voice and SMS on existing subscriptions to fuel top line growth when Puncak Semangat rolls out its products,” said HwangDBS in the note.

Yesterday, Axiata announced that Celcom had entered into a master collaboration agreement with Altel to share their respective 2600MHz 4G LTE spectra, with 2x10MHz coming from Celcom and another 2x10MHz from Altel.

The companies also agreed that Celcom will be the exclusive infrastructure and wholesale provider of Mobile Virtual Network Operator (MVNO) services to Altel.

“Altel would also consider a request by Celcom to share the remaining 2x10MHz spectrum it had received from the Malaysian Communications and Multimedia Commission (MCMC),” said HwangDBS.

The research house said Altel is a company owned by Puncak Semangat, which is linked to Syed Mokhtar.

Eyebrows were raised last year when MCMC awarded the biggest block of LTE spectrum to little-known Puncak Semangat. While the Malaysian telecommunications incumbents received 20MHz of spectrum, Puncak Semangat was awarded 40MHz.