Axiata’s 19.1% associate in India, Idea Cellular, reported strong 7% q-o-q (+24% y-o-y) and 12% q-o-q (+36% y-o-y) rise in revenue and EBITDA which increased to INR45.2bn and INR12bn respectively for 1QFY12. This came on the back of a 6.2% q-o-q (+38% y-o-y) jump in the number of subscribers, stable average revenue per minute (ARPM) and lower subscriber acquisition cost. Nonetheless earnings were down.
Maintain BUY on Axiata. We are keeping our BUY recommendation on Axiata based on a SOP target price of RM5.77. We view positively the recent spate of tariff hikes in India as it should mitigate the pressure on EBITDA margins and contribute towards stronger revenue growth going forward on the back of the sustained increase in call traffic. Idea contributes less than 10% of Axiata’s net profit and only 4% of our SOP on the group. Our implied valuation on Idea incorporates a 20% discount for regulatory risks in India. Axiata stays as our preferred pick in the telecoms sector.
Maintain BUY on Axiata. We are keeping our BUY recommendation on Axiata based on a SOP target price of RM5.77. We view positively the recent spate of tariff hikes in India as it should mitigate the pressure on EBITDA margins and contribute towards stronger revenue growth going forward on the back of the sustained increase in call traffic. Idea contributes less than 10% of Axiata’s net profit and only 4% of our SOP on the group. Our implied valuation on Idea incorporates a 20% discount for regulatory risks in India. Axiata stays as our preferred pick in the telecoms sector.
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