Axiata Group - 1H12 within expectations

Period    1H12 for XL Axiata

Actual vs.  Expectations

 1H12 core NP of Rp1.5T was in line and accounted for 48.4% and 45.9% of ours and the street’s full year estimates, respectively.

Dividends   No dividend was announced during the quarter.

Key Result Highlights

 YoY, 1H12 revenue rose 13% to Rp10.3T driven by higher contribution from the SMS (+20%), Data & VAS (+18%) and Voice (+7%) segments. With the growth in data, non-voice revenue now contributed half of XL’s total usage revenue of Rp8.2T. The strong data growth has led XL’s data users to increase by 32% to 26.5m with most of the subscribers committed to either the Pay Per Use or Volume based data plans. XL’s data users now accounted for 57.7% of the group’s total subscribers of 45.9m. 

 QoQ, revenue was up by +8% while core net profit rose in tandem with the top line, coming in at Rp798m (+7%). EBITDA margin was however lower at 47.7% (1Q12: 48.3%) due to higher interconnection and direct expenses. 

 Total operating expenses meanwhile increased by 22% YoY to Rp5.2T in 1H12 due to higher infrastructure expenses of Rp2.5T(+42% YoY), caused by the increase in rental sites, towers and leased lines expenses as a result of a higher base stations rollout and higher 3G infrastructures. 

 2Q12 EBITDA increased by +6% QoQ to Rp2.5T but with a lower margin of 47.7% vs. 48.3% in 1Q12. The lower margin was mainly due to the acceleration in the infrastructure rollout for data.  

Outlook   XL Axiata is maintaining its targeted revenue to be within or above its peers’ expected growth in FY12 of 6.0-8.0%. 

 No change in its high 40’s EBITDA margin guidance. 

 The targeted FY12 capex guidance is maintained by the company at Rp7.0T-8.0T, with around 60% allocated for data or the 3G network.

Change to Forecasts

 We have fine-tuned our Axiata’s FY12, FY13 and FY14 normalised net profit forecasts by +0.5%, +0.6% and +0.9% respectively to RM2647m, RM2807m and RM2843m respectively.

Rating  Maintain MARKET PERFORM

Valuation    Axiata TP is maintained at RM6.25 based on a targeted EV/forward EBITDA of 7.6x (+2 SD) Risks   Regulation risks in its overseas ventures

Source: Kenanga