Axiata slips, Affin Research maintains reduce rating

KUALA LUMPUR: Axiata Group Bhd shares slipped in late morning on mild profit taking activities on Thursday, July 7 while Affin Research maintained its anti-consensus reduce rating.

At 11.55am, it was down four sen to RM5. It rose to a high of RM5.05 earlier. There were 5.15 million shares done.

Affin Research explained its anti-consensus reduce rating on Axiata due to inferior dividend yields at 2% which do not support its valuations and also high risk to earnings downgrade.

“We think that street (12% above ours) is overly optimistic (1Q11 net profit accounts for 19% of FY11 forecast),” it said.

Other factors were a potential share overhang from Telekom Malaysia’s disposal of its remaining 101.5 million shares in Axiata while there was a renewal fee for 70% owned Robi’s spectrum (estimated at US$278 million) although it believed the market had already priced in this info.

“The high foreign shareholdings of 23% pose great risk should there be a reversal in short-term protfolio flows – we also note that foreign shareholding has progressively risen over the past 12 month and is near its all time high of 26% prior to its demerger.

“We also believe that the recent uptick in share price was also driven by an increased weighting on the FBM KLCI index rather than spurred by intrinsic fundamental improvement,” it said.

Axiata’s weighting in the 30-stock KLCI is 6.21%.