Malaysia GE14 Stock Special Report

GE14 Special Report Week 1 - Axiata Group Berhad

Joe Cool
Publish date: Tue, 27 Feb 2018, 11:35 AM

  

 

 

About Axiata Group Bhd

Axiata Group Berhad is a Malaysia-based telecommunications company, which manages Axiata Group. The Group has controlling interests in six mobile operators under the brand names of 'Celcom' in Malaysia, 'XL' in Indonesia, 'Dialog' in Sri Lanka, 'Robi' in Bangladesh, 'Smart' in Cambodia and 'Ncell' in Nepal, as well as minority interests in 'Idea' in India and 'M1' in Singapore. Axiata Group's products and services include prepaid and postpaid mobile services, television broadcasting and cable television services, Internet services, enterprise solutions, digital marketing and e-commerce services, mobile advertising and machine-to-machine (M2M) solutions, among others. Via 'edotco', its infrastructure company, the Group also delivers telecommunications infrastructure services and operates telecommunications towers regionally. Other regular undertakings of the Group include investment holding and the distribution of communication device and related products..

 

The most notable director in Axiata who is influential to the society is Tan Sri Dato’ Azman HJ. Mokhtar, who is currently the CEO of Khazanah Nasional Berhad and Chairman of Axiata Group.

largest manufacturer of frozen Asian food delicacies.

Based on Financial Year (FY) 2016 full year results, Axiata achieved RM 21.6 billion turnover, which is categorised as a large multinational company based on turnover value. Other aspects of the company’s FY2016 financial results are illustrated in the table below.

 

Company

Axiata Berhad

(FY Dec 2017)

Revenue (RM Million)

21,565

Net Earnings (RM Million)

633

Net Profit Margin (%)

2.94

Return of Equity (%)

2.14

Total Debt to Equity Ratio

1.00

Current Ratio

0.53

Cash Ratio

0.13

Dividend Yield (%)

1.41

Earnings Per Share (Cent)

5.6

PE Ratio

96.90

 

Axiata’s revenue has been on a upward trend from RM 17.7 billion in FY2012 to RM 21.6 billion in FY2016 which translates to a 20% increase in 4 years. In terms of net earnings, Axiata experienced a sharp drop in FY2016 from RM 2.6 billion to 0.6 billion due to decline in performance at its Malaysia, Bangladeshi and India businesses, higher depreciation and amortisation, net finance cost and forex losses.

Net profit margin wise, Axiata scores extremely low at 2.94% margin, as compare to its peers who are achieving profit margin at the range of 20%. Return of equity (ROE) wise Axiata scores a low value as well at 2.14%

On company’s debt, Axiata has a decent debt to equity ratio at 1.00, which is common in telecommunication company due to high initial infrastructure investments needed. The company’s both current ratio and cash ratio are of  below average values at 0.53 and 0.13 respectively.

Axiata pays a low dividend yield of 1.4% in FY2016, as compared to other telcos  which pays a dividend yield ranging from 3% to 5%. Axiata’s dividend payout ratio of 1.4 shows that the company is paying more than what it earns, which is unhealthy for the company’s growth.

In conclusion, Axiata’s financial health is no longer as good as before due to the sharp drop in profit for FY2016, causing its PE ratio to jump from 20 to 96.90. Moreover it is paying a low dividend yield of 1.4% makes it unattractive as compared to other telecommunication companies who are paying higher dividends.

Moving forward, Axiata targets to strengthen its position as a leading telecommunication service provider in Asia region through more Capex allocation to improve coverage and network quality, as well as explore new growth areas such as Advertising, Digital Financial Services and B2B (Business to Business) solutions.

 

(Next quarterly results announcement: Last Week of Feb 2018)

 

News on Axiata Group Bhd

 

According to The Star news, Axiata Group has recently announced that its subsidiary, dialog Axiata PLC has taken a 50.59% stake in e-learning solutions and digital education provider Headstart (private) Ltd. Dialog’s investment totalling US$640,000 was through a subscription of bonds, which may be converted to equity over time with the initial conversion resulting in a 26% equity stake in Headstart in 2015. With the conversion (dated Jan 1, 2018) of the last tranche of these outstanding bonds, Dialog increased its stake in Headstart to 50.59%.

 

More over, Celcom Axiata Bhd is welcoming a new player in the local telco industry called Yodoo. However, CEO Michael Kuehner mentioned that the industry needs more consolidation instead of another player. Kuehner expects a flat growth in this industry because of the decline in revenue for the past three years.

 

On another matter, analysts are still banking on the merger between Axiata and Telekom Malatysia to set the tone for an industry consolidation, which is deemed as the logical route forward.

 

iVolume Spread Analysis Weekly Chart & Comment – Axiata Group Berhad

 

 

Based on 1-year weekly iVSAChart above, we notice currently Axiata is trending up nicely at Mark-Up stage (Stage 2) since early of September 2017 with potential return of 10.8% from the buy signal. The changes in trend are confirmed & indicated by Market Structure in iVSAChart.

 

We believe the uptrend for Axiata will continue as there are lots of Sign of Strengths (SoS) since September 2017. The SoS are indicating support from Smart Money. The chart above also indicated no Sign of Weakness (SoW) for the past 6 months and this have illustrated that the Smart Money are yet to distribute their stocks.

 

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