Nomura upgraded Malaysian telco Axiata Group Bhd to "buy" from "neutral" on improving operational profits, expectations of investments boosting revenue in the coming years and strong cash flows.

It also raised Axiata's target price to RM7.10 per share from RM5.50.

"Although Axiata's share price is up 20 percent year to date, we still believe the above reasons should yield operational upside for the stock," Nomura said in a note to clients.

Axiata shares were down 0.3 percent on Tuesday. The stock however, represents a bright spot in the Malaysian telco sector that faces greater competition in the second half of this year that could keep a lid on operational profits, Nomura said.

Nomura cut Maxis Bhd to "reduce" from "neutral" as the current strength in its share price signals an opportunity to lock in profits given that earnings could be weaker in the future.

But Nomura still raised Maxis target price to RM6.20 per share from RM5.95 citing its strong dividend payout. -- REUTERS