Axiata’s full-year results met our and street estimates with
a variance of 3-5%. The highlight was the higher than expected final DPS of 15
sen/share, with the group raising its payout guidance to 65% from 30%. This is
a positive surprise considering that the market had under-estimated the
timeline and magnitude of the payout. Axiata stays as one of our top picks in
the telecoms sector given the twin catalysts of reasonable growth and rising dividend yields in closing the gap with
its local peers. We maintain our BUY recommendation, with our
SOP FV bumped up to RM5.80 (from RM5.60 previously) on rolling over to
FY13.
In line- results is
secondary. Stripping out one-offs totaling RM40m and RM193m for 4QFY11 and
FY11 respectively (including a RM140m broadband tax incentive at Celcom),
Axiata’s core earnings made up 95% and 97% of our and consensus estimates (results
were 3% off our/street revenue and EBITDA projections). A pleasant surprise was
the proposed bumper final DPS of 15
sen/share, which together with the interim DPS totals 19sen/share, or a
payout of 60% for FY11 (FY10: 10sen/share). The bumper payout indicates the
group’s willingness to meet investors’
expectations of rising dividends as it is rapidly building cash, thanks to the
strong operational momentum across few OpCos. FY11 revenue and EBITDA
growth of 5.3% and 1% respectively fell short of the articulated KPIs of 10%
and 10.3% but the market has already priced in the slower growth. Overall, we
lower our FY12/13 forecasts by 5-7% post the results conference call, during
which Axiata shared its 2012 KPIs (see
Table 2).
Celcom revenue growth
outstrips Digi’s in 4Q. Celcom’s voice resuscitation efforts paid off as they helped arrest the decline in domestic
voice and led to the very strong 4% q-o-q growth in revenue, above Digi’s +2%
q-o-q and likely Maxis’, which is due to announce its results today. Celcom’s
MOU/ARPU grew for the second consecutive quarter, with data making up 34% of
revenue in 4QFY11. While Celcom noted that Maxis was “quite aggressive’’ during the quarter,
Digi’s earlier observation of stronger competitive response from U Mobile
suggests that the telcos perceive competition from rivals differently, with
Maxis possibly seen as a stronger threat to Celcom.
Good showing across
most OpCos. XL’s revenue grew 3%, supported by a 4% rise in voice revenue
despite the premium SMS ruling while Dialog’s EBITDA expanded a strong 11% q-o-q
against a 3% q-o-q increase in revenue (+10% y-o-y for FY11) as the telco
benefited from the steady pricing environment and kept a tight lid on opex. Its
payTV business (DBN) posted inaugural profits
since the business was acquired 6
years ago. Robi marked another high in terms of quarterly revenue, up 5% q-o-q,
but EBITDA margin fell marginally due to the higher regulatory fees paid to
renew its 2G licence.
OTHER HIGHLIGHTS FROM
THE CONFERENCE CALL WITH MANAGEMENT
Driving data across.
Axiata highlighted that overall data revenue (including SMS) for the group
surged 29% y-o-y in FY11 making up 20% of consolidated revenue, led by XL and
Celcom. While voice cannibalization remains a concern, it noted that the
erosion in voice revenue per minute (RPM) for Celcom and Dialog was under 10%
y-o-y compared to the over 20% y-o-y fall across all OpCos (adjusted for forex)
indicating stabilization in prices for
the more mature markets. The RPM erosion at XL was a strong 17% y-o-y in FY11, as due to the fierce
competition from Telkomsel and Indosat, particularly in 1H2011. Axiata expects
EBITDA margin for the group to remain under pressure over the medium term due
to rising proportion of non-voice revenue which incur lower margin.
Dividend payout deemed
‘conservative’. Axiata
said the
higher 65% payout guidance has
taken into account potential M&As and capex. It is
also independent of the dividend
income it receives from OpCos. We see prospective
dividend streams being supported by its rising FCF yields of 7-10% for FY12/13
and on the back of the net debt/EBITDA of 0.7x,
leaving room for more
capital management initiatives.
Our DPS forecasts have been raised to 21 sen/share and 24 sen/share
respectively for FY12 and FY13.
No equity injection
for Idea. Axiata is comfortable with its current shareholding in Idea,
which is already close to the 20.11% cap allowed under the agreement with its
partner, the Aditya Birla Group. Management believes India’s regulatory
overhang will clear up over the course of the year and highlighted the downside
from the recent cancellations of 122 mobile licences in India as having an insignificant impact given that
the affected circles are EBITDA negative. This is consistent with our earlier
view.
RM4.4bn capex for
2012. Management has maintained group capex guidance at RM4.4bn for FY12,
mainly for Celcom (RM800-RM1bn) which is
currently modernizing its network and XL (RM2.5bn) which has front-loaded its investment
for data. Capex spending is likely to
peak in 2013.
Source: OSK188
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