Analysts say Axiata may raise dividend payout

PETALING JAYA: Axiata Group Bhd may raise its dividend payout in three to four months once it concludes a review of its capital management, according to analysts.

In their reports, the research arms of OSK, CIMB and Kenanga indicated that this was a potential re-rating catalyst for the stock. Axiata chief executive officer Datuk Seri Jamaluddin Ibrahim and chief financial officer James Maclaurin had told analysts at a post-third-quarter results conference call that the telco was holding on to its minimum 30% dividend payout policy for now and would increase it progressively.

However, OSK analyst Jeffrey Tan said in a client note that Axiata would likely manage its capital more aggressively in the short to medium term due to its rapidly rising cash hoard of RM6.7bil as at end-September and the expectation that capital expenditure (capex) would level off from 2012.

“Assuming a target net debt/EBITDA (earnings before interest, taxes, depreciation, and amortisation) of 0.8 to one times from 0.5 times currently, we estimate scope for the group to return 60 sen to RM1 per share in dividend,” he said.

CIMB analyst Kelvin Goh noted that with Axiata's declining debt and the absence of any acquisition targets, which meant it had no imminent use for cash, pointed to the possibility of a hike in dividend payout.

“With return on invested capital being a key performance indicator (KPI) for Axiata, a reduction of its cash pile would bolster this indicator.

“Axiata indicated that it is reviewing its dividend policy of gradual increase' from 30% although it is downplaying any potential increase for now. It said its growth rate has not met KPI targets, which raises the possibility of an increase in the dividend payout to position itself as a dividend stock instead of a growth stock,” he added.

Kenanga analyst Cheow Ming Liang said the telco had increased its capex guidance for the financial year ending Dec 31 (FY11) to RM4.4bil from RM3.3bil on the back of its Indonesian unit XL's accelerated network roll-out for data. Of that amount, RM950mil is apportioned to Celcom while XL, Dialog, Robi, Hello and the other operating companies will receive RM2.3bil, RM197mil, RM585mil, RM22mil and RM25mil respectively. The capex for FY12, meanwhile, is expected to fall below RM4.4bil.

For its third quarter ended Sept 30, Axiata saw its net profit dip 7.74% to RM589.62mil from a year ago due to lower profits from key subsidiaries. Revenue was up 6.53% to RM4.19bil on higher contribution from Robi and Dialog, where revenue grew 13.3% and 10.3% respectively.