Axiata Group - XL’s FY12 results hit by higher costs

Period    FY12 for XL Axiata (“XL”)

Actual vs.  Expectations    XL’s FY12 core NP of Rp2.9T was 7.0% below ours as well as 9.6% lower than the street’s full year estimates. The culprit was mainly due to higher operating expenses, which rose by 25.9% YoY. 

Dividends   No dividend was announced during the quarter. 

Key Result Highlights     XL’s FY12 revenue rose by 15% YoY to Rp20.9T, driven by higher contribution across all services, particularly the Data & VAS (+32%), SMS (+16%) and Voice (+6%) segments. With the growth in data, non-voice revenue now contributed half of XL’s total usage revenue of Rp16.7T. The strong data growth has led XL’s total data traffic to surge by 208% to 22,612 TB. XL’s data users now accounted for 55.9% of the group’s total subscribers of 45.8m with most of the users committed to either the Pay Per Use or Volume based data plans. 

 QoQ, the revenue was lower by -7%, no thanks to the lower infrastructure revenue (-16%). Core net profit dipped to Rp577m (-12%) as a result of the lower turnover coupled with a weaker EBIT margin (18.5% vs. 19.6%) due to staff costs.  

 The total operating expenses, meanwhile, has increased by 26% YoY to Rp11.2T in FY12 due to higher infrastructure expenses of Rp5.2T (+35% 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. 

 The group’s FY12 EBITDA meanwhile has increased by 4% YoY to Rp9.7T although the margin was lower at 45.8% vs. 50.6% a year ago. The lower margin was mainly due to higher interconnection rates as well as network costs related to the expansion of its data infrastructure. 

Outlook   XL is expecting its targeted FY13 revenue to be within or above its peers’ expected growth of about 10%. Meanwhile, the group is targeting to record a low 40’s% EBITDA margin in FY13 as a result of higher data contribution and the impact of the interconnection rate. 

Change to Forecasts    We have lowered our Axiata’s FY12, FY13 and FY14 net profits by -0.8%, -2.4% and -2.9%, respectively.

Rating    Maintained at MARKET PERFORM 

Valuation    Our Axiata TP has been lowered to RM6.78 (from RM6.81 previously) based on an unchanged targeted FY13 EV/forward EBITDA of 8.3x (+2.0 SD).

Risks   Regulation risks in its overseas ventures.

Source: Kenanga