Axiata Bhd - Eyeing Myanmar?

News   News reports said that Axiata is likely eyeing a telecoms licence in Myanmar.

 As many as four new licences may be made available to both local and foreign investors according to Myanmar’s authority.

 Myanmar is targeting to boost its wireless penetration to 50% by 2015.   

 

Comments   The recent USD1.5b multi-currency Sukuk programme could provide the group the flexibility to raise funds should Axiata plan to penetrate into a new market. 

 Myanmar has a population of 60.3m, two times largerthan Malaysia, and its telecommunications sector is dominated by the state-owned monopoly telephone service provider, Myanmar Posts and Telecommunications (MPT). With the military government’s conservative approach to structural reform, it would not be surprising that MPT will continue to maintain its monopoly on the sector. 

 Based on our understanding, the mobile penetration rate in Myanmar was estimated at 1.6% as of June 2011. This could provide ample room to grow for newcomers to the sector. Nevertheless, the new investment opportunity may also come with some unforeseeable risks given that the political situation in Myanmar is still uncertain at least in the short to medium term. 

Outlook   The group’s outlook remains challenging in our view judging from the persistent strong competition in both its local and overseas ventures. Apart from heightening competitions, regulation issues in its key operating countries may continue to put barriers in its operations going forward.

 That said, the continuing strengthening of USD may provide some currency translation gains to the group during the short term.      

  

Forecast  No changes in our FY12-FY14 earnings forecasts. 

Rating   Maintain MARKET PERFORM

Valuation   Maintain target price at RM6.25 based on an unchanged targeted FY13 EV/forward EBITDA of 7.6x (+2SD) 

Risks   Regulation risks in its overseas ventures.

Source: Kenanga