Star Online: Business
23 July 2012
THE excitement on Axiata Group Bhd is almost palpable. The stock is currently playing catch-up to its peers of Maxis Bhdand DiGi.Com Bhd and the noise on the grapevine has been all about more dividends along with foreign buying of the stock.
Since the start of June, Axiata has been literally northbound. From the RM5.20 level, Axiata has been steadily climbing, and touched its 52-week high of RM6.23 on July 16. As of last Friday, the stock was down 10 sen to close at RM5.89 with a turnover of 15.1 million shares.
Over the last 12 months, Maxis and DiGi have been firm favourites of the institutions, with their share prices appreciating by 30% to 60%, versus Axiata's 20% rise.
“We see room for Axiata to outperform peers in the next six months, particularly considering peers' inflated valuations and Axiata's strategic position to spring surprise catalysts from an under-leveraged balance sheet,” said an AmResearch analyst.
He added that Axiata is the cheapest local mobile telco trading at a price earnings ratio of seven times (x) for its financial year (FY) ending Dec 31, 2012. In comparison, Maxis and DiGi trade at 12x and 11x, respectively.
“Any surprise on the dividend front as well as potential mergers and acquisitions (M&As) should serve as strong share price catalysts,” says the AmResearch analyst.
Alliance analyst Toh Woo Kim believes that management's decision to accelerate capital expenditure (capex) for extensive data rollout in Indonesia is a move in the right direction.
“Dividend is well supported by its huge cash balance and strong cash flows from Celcom, and should also rise progressively from the current 65% payout once capital expenditure spending starts to reduce going forward. Rising free cash flows with potential for higher dividend payout is a key re-rating catalyst for Axiata, which currently offers a decent net dividend yield of 4%,” said Toh.
Axiata spent some RM4.4bil in capex last year, and the guidance is for a further RM4.2bil to be spent this year. Most of this will be for its Indonesian operations as it prepares to roll out more 3G network.
An analyst from a local research forecasts Axiata to spend RM4bil and RM3.7bil for its financial year ending Dec 31, 2013 (FY13) and FY14. Based on Axiata's low gearing level coupled with its cash levels of some RM7bil, there certainly is room for dividends.
Toh said that Axiata offered an attractive net dividend yield of 4% to 6.2%, assuming a payout ratio of 65% to 90% for FY13 and FY14.
“Given declining capital expenditure and rising cashflow from its operating subsidiaries, we believe there is upside potential to its dividend payout, particularly in FY13 and FY14. Assuming a 100% payout, Axiata's net dividend yield could potentially rise to 6.3% to 6.9% in FY13 to14,” said Toh.
On Thursday, Axiata through its wholly owned subsidiary, Axiata SPV2 Bhd, established a a multi-currency sukuk programme which allowed the issuance of up to US$1.5bil (RM4.65bil) in nominal value. It will provide the group further financial agility for the long term. The sukuk programme was Asia Pacific's first internationally rated multi-currency sukuk.
Based on its media release, Axiata is also the first Asian telecommunication company to set up such a multi-currency sukuk programme. The sukuk programme allows airtime vouchers representing an entitlement to a specified number of airtime minutes on the mobile telecommunication network of subsidiaries of Axiata for on-net calls, to be included as a trust asset.
This programme is based on the syariah principle of wakala and provides the flexibility of using airtime vouchers, syariah compliant shares, and lease assets, as well as murabaha receivables arising from the sale of commodities as the underlying assets.
“More importantly, the exercise is a step towards underpinning our view of potential acquisitive growth, given Axiata's under-leveraged balance sheet net gearing 0.2x, net debt to EBITDA (earnings before interest, taxation, depreciation and amortisation) of 0.5x,” said the AmResearch analyst.
While the AmResearch analyst does not rule out refinancing of debt as part of utilisation, it believes only the Bangladesh associate has such an immediate term need, which is about US$130mil (RM403mil) to US$140mil (RM434mil) for a one-year term loan maturing in the fourth quarter of 2012. This amount forms only 8%-9% of the sukuk raised. This could also be the first of a few sukuk issuances in the next six months.
Assuming Axiata draws down the total amount of US$1.5bil (RM4.65bil), net gearing increases to nearly 40%. Any sukuk raised going forward for refinancing will not impact its gearing position.
Axiata's net profit increased 3.1% to RM565.63mil in the first quarter ended March 31, 2012. Revenue increased 8% to RM4.26bil from RM3.94bil over that period.
Axiata has controlling interests in mobile operators in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia with significant strategic stakes in India and Singapore. It also has a stake in mobile telecommunication operations in Thailand. The group's mobile subsidiaries and associates operate under the brand name Celcom in Malaysia, XL in Indonesia, Dialog in Sri Lanka, Robi in Bangladesh, Hello in Cambodia, Idea in India and M1 in Singapore.
[Source]
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