KEY INVESTMENT HIGHLIGHTS

• Maintain NEUTRAL with an unchanged SOP-derived target price of RM2.56 post the 2QFY24 results announcement
• Better performance from the major opcos lifted 1HFY24 normalised earnings to RM330.0m (+340.0%yoy), in-line with expectation
• Some opcos may potentially suffered from earnings pressure in 2HFY24
• First interim dividend of 5sen, on track to meet full year target of 10sen per share

Ongoing regional developments may post certain risks for the group. We maintain our NEUTRAL on Axiata with an unchanged SOP-derived target price of RM2.56 post the 2QFY24 results announcement. We note that the group has shown a commendable 1HYF24 financial performance. However, we do not discount the possibility of future earnings volatility which mainly stem from: i) potential merger of XL Axiata with Smartfren which is lossmaking, ii) unrest and natural disaster at Bangladesh which may affect Robi, iii) upcoming Sri Lanka election in September 2024 that may impact Dialog and, iv) funding fibre deployment roadmap in Indonesia for Link Net.

Better quarterly performance. 2QFY24 normalised earnings came in at RM181m, an improvement from RM37.0m achieved a year ago. This was mainly supported by higher revenue growth of +2.9%yoy to RM5.7b contributed largely by XL, SMART, ROBI and EDOTCO as well as a higher share of profit from associates i.e. Celcomdigi Bhd (+35.2%yoy). Nonetheless, Link Net and Boost underperformed.

In-line with expectation. On a cumulative basis, 1HFY24 normalised earnings amounted to RM330.0m, an improvement of +340.0%yoy. This came in within our expectations, making up 47.2% of our full year FY24 earnings estimates.

Dividend on-track. The group also announced its first interim dividend of 5sen per share. This is on track to meet the full year target of 10sen per share.

Source: MIDF Research - 29 Aug 2024