• Maintain HOLD (TP: RM2.50). Axiata’s FY23 top-line improved, growing by +9.9% YoY, in-line with our expectations, accounting for 98.3% of total revenue forecast. Notably, both XL and Robi experienced double-digit growth, with XL increasing by +10.9%, supported by a sustained pricing environment leading to an uplift in ARPU to IDR41k (+5.1%) and improved contributions from Data and Digital Services. Meanwhile, Robi recorded a growth of +16.0%, driven by strong subscriber growth (+7.8%) and an expansion of ARPU to BDT142 (+11.8%). Nonetheless, the group’s FY23 core net profit of RM364mn (-77.0% YoY), dragged by the impact of Ncell and EDOTCO Myanmar asset impairments, along with increased net finance costs and a reduced share of CelcomDigi’s results compared to Celcom's contribution as a subsidiary in the previous year. The group’s bottom-line was within ours but below consensus expectations, accounting for 104.3% and 85.1% respectively. Axiata declared a second interim dividend of 5.0 sen per ordinary share, bringing cumulative FY23 DPS to 10.0 sen (vs 14.0sen in FY22). Maintain a HOLD call with an unchanged TP of RM2.50. Our TP is based on sum-of-part valuation with each of the operating company valued using EV/EBITDA metric.

• Key highlights. In 4QFY23, the group's revenue increased by +7.2% YoY, bolstered by all operating companies except for mobile operations in Sri Lanka, fixed broadband operations in Indonesia, and digital business (Boost). The group recorded net loss amounted to –RM695mn. However, excluding certain exceptional items, namely forex and derivative gains, Ncell asset impairment, and others, Axiata recorded a core net profit of RM139mn, reflecting a -56.0% YoY decline compared to 4Q22.

• Earnings Revision. No changes to our forecast.

• Outlook. While we maintain caution regarding external factors that could potentially impact Axiata's earnings, we hold a positive outlook on XL's prospects, buoyed by the current demand for data. Aside from that, the management’s guided FY24 KPIs include: (i) mid-single-digit revenue growth, (ii) mid-teens EBIT growth, and (iii) a capex of RM6.1bn. A downside risk to our call includes unfavourable 5G rollout regulations.

Source: BIMB Securities Research - 23 Feb 2024