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Wednesday, June 15, 2011

Axiata update – Laying the cables for future growth (CIMB)

We maintain our OUTPERFORM call on Axiata following our non-deal roadshow with the telco. It is putting in sufficient effort to counter the challenges of slowing or declining voice revenue and exploring new sources of revenue. Cost-efficiency and capex roadmaps are being put into place to cope with future demands. Management downplayed its dividend potential, saying that payout will rise gradually and it wants a balance sheet that gives it firepower for any potential in-country consolidation. In spite of this, we feel that it has room for a special dividend, which is a re-rating catalyst given its rapidly declining gearing and undrawn credit facilities. Our target price is RM6.08, based on SOP.

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