Analyst Research Report Snapshot

Title:

Company Update – Axiata (REDUCE, maintain) - Staying on course

Price:

$23.00

Provider:

Affin Investment Bank

Date:

06 Nov 2012

Pages:

3

Type:

AcrobatPDF

Companies referenced:

AXIA.KL

Available for Immediate Download
Summary:

Annual Axiata Analyst Day 2012 Dato Sri Jamaludin kicked off yesterday’s Analyst Day by highlighting major key milestones and outlined management’s strategy in generating a new generation telco over 2013-15. Broadly, the meeting revolved around: 1) Focus on data – this is very much the case across all opcos. Generally, the 3 drivers of data, i.e. proliferation of smartphone devices, improving network speeds and increasing applications, would accelerate data requirement going forward. Celcom and XL continue to invest heavily on network infrastructure to meet this. However, current 3G utilisation remains fairly low at c. 35%, bringing to question whether these opcos are over-investing. This becomes even more glaring since technology evolves rapidly and hence raising the risk of capex obsolescence. Another key highlight on Celcom was its strategy to reduce its exposure to the dongle business (due to its high usage and low yields), a strategy which DiGi (BUY; TP: RM6.04) had already implemented several quarters ago. Overall, the key challenge for the data business is to improve yields. Margins for the data business remains below that of its traditional voice and sms business and hence would be margin dilutive ahead, as this segment grows. 2) Operational improvement – To enhance operational efficiency, management at Celcom and XL highlighted the segregation of the country into multi territories in order to increase its market knowledge and competitive strengths in those areas. A key to this is that the opcos would have real time information, which helps in dynamic pricing. This tied in with the group’s strategy of enhancing its IT investment. We nevertheless believe that this is nothing new and its peers in their respective countries have similar market intelligence. Putting things into perspective, we have not noticed any significant positive impact in recent quarters. 3) Financial management – management continues to focus on refinancing of older more expensive debt with lower rates. Recent debt raising include several sukuk issuance which is expected to result in cost savings of RM350m over a period of 10 years. Capex intensity is also projected to decline in the years ahead, providing room for stronger FCFs ahead.

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