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Company Update – Axiata (REDUCE, maintain) - Already pricing in a strong recovery at XL




Affin Hwang Investment Bank Bhd


04 Apr 2013





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High expectations to deliver in Indonesia. Street, including ourselves, are likely throwing caution to the wind as we continue to remain upbeat on Axiata’s FY13 earnings despite management’s cautious guidance. Based on Axiata’s FY13 headline KPI revenue and EBITDA growth of +7.6% and +0.2% respectively, the implied FY13 EBITDA margin is 39.7% (a decline from 42.6% in FY12). However, we are forecasting a FY13 EBITDA margin of 41% while consensus appears even more upbeat, projecting a firmer 41.6%. Thus, implied in the more upbeat estimates is for Axiata’s Indonesian unit to register a stronger recovery in the quarters ahead. Recall that 67% owned XL had been facing a bout of aggressive competition, which resulted in a revenue dip in 4Q12 as well as margin compression. Management believes that they have tackled this issue and the market appears to have factored this in.

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