Thursday, December 1, 2011

Axiata Berhad: 3Q11 Results Briefing

2 December 2011
Price Target: RM4.92
Share Price: RM4.93


Highlights
Axiata recorded a strong subscriber growth of 26% yoy reaching 186.9m customers despite softening key markets. Revenue growth continues to be driven by significant increase in data particularly at XL and Celcom with YTD growth of 50% and 29% respectively.

Celcom subscriber base declined to 11.4m (2.7m postpaid and 8.7m prepaid) due to rationalization of multi-SIM user and we think this is the reason that ARPUs are elevated (postpaid +RM3 to RM95 while prepaid +RM1 to RM37). Meanwhile, MoU broke its down trend and came in higher +6% qoq at 210mins thanks to the festive season in 3Q. Wireless broadband contributed RM197m with +6% qoq on the back of 924k subscribers. Smartphone penetration is 15%.

XL successfully gained momentum and acquisition through new offerings with 12% subscribers increase qoq reaching 43.4m. Prepaid ARPU stagnated at IDR31k while postpaid plunged to IDR171k or declined -17% qoq even though 3Q should have the benefit of festive season. XL explained that lower outgoing MoU is due to shifting in subscribers’ behavior from voice to SMS and data usage. Smartphone penetration is 11%.

Dialog recoded a healthy growth in revenue mainly contributed by mobile, TV and infra businesses. ARPU increase 8% qoq driven by increase take up of premium VAS products. MoU growth mainly by prepaid due to increase in affordability.

Robi qoq revenue growth attributed mainly to VAS including data services and interconnect business. PAT decreased qoq by FOREX loss and accelerated depreciation on old swapped equipment due to network modernization.

Catalysts
- Higher smartphone penetration boosting data ARPU
- Strong growth in low penetration developing markets.
- More cost savings from collaboration with DiGi.

Risks
Regulatory risks, FOREX fluctuations & competitive risks.

Forecasts
Updated with latest guidance on higher CAPEX and depreciation along with tweaking lower our assumptions of subscriber base and ARPU. Our FY11-FY13 EPS are revised lower by -9.0% to -10.7%.

Rating - HOLD, Target Price: RM4.92
Positives
Despite the challenging 3Q11, Axiata’s main businesses (Celcom, XL, Dialog) continue to execute well.

Negatives
Exposure to Indian telecom market which is currently under close scrutiny by the government.

Valuation
We keep our HOLD call as we cut out target price by 9% to RM4.92 from RM5.44. We opine that the robust growth story may have come to an end especially for Celcom and XL who are the main contributors as market matures and competition intensifies.



Source: HLIB Research

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