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Wednesday, August 24, 2011

Axiata - 2QFY11 below – Weakening voice (CIMB)

Axiata’s annualised 1H11 core net profit missed our forecast by 12% and undershot consensus estimates by 17% because of weaker-than-expected margins at Robi. To our delight, Axiata announced an interim DPS of 4 sen (26% payout) and its balance sheet remains under-geared which supports our view of dividend surprises. But we are a little more cautious on Axiata because of 1) uncertainties over the prepaid sales tax passthrough, and 2) Celcom’s weaker-than-expected showing. We reduce our FY11-13 core net profit estimates by 7-10%, DPS by 20% and SOP-based target price from RM6.20 to RM5.80 after lowering our assumptions for XL Axiata and Bangladesh’s currency, and raising capex. Axiata remains an OUTPERFORM, with a likely catalyst being dividend surprises to the market. But we now prefer SingTel for its more attractive dividends and valuations.

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