Axiata's Myanmar tower sale sparks Edotco monetisation talk
Hong Leong Investment Bank (HLIB) said the move appears strategically aligned, as Khazanah had earlier increased its stake in Edotco to 32 per cent by acquiring the entire 21 per cent held by Innovation Network Corporation of Japan (INCJ) in March 2025.
"Assuming Edotco is valued at an enterprise value of US$3.5 billion or RM14.9 billion, Axiata could net approximately RM6.3 billion for its 63 per cent stake after deducting Edotco's net debt of approximately RM4.9 billion.
"We estimate that this could result in interest savings of up to RM210 million if utilised entirely to reduce debt at the holding company level, thereby close to offsetting the loss of earnings contribution from Edotco," it said in a note.
The firm stated that following the completion of the XLSmart merger in April 2025, Axiata is set to receive an immediate equalisation payment of US$400 million, with an additional US$75 million expected within a year, pending certain conditions.
It added that together with the potential proceeds from Edotco's monetisation, Axiata could significantly reduce its holding company debt, paving the way for a more streamlined structure and greater flexibility in distributing dividends from its telecommunications assets.
"We estimate Axiata's net debt or earnings before interest, taxes, depreciation, and amortisation (EBITDA) would also significantly decrease to 1.0 times from 3.0 times in the first quarter of 2025 (1Q25) following XLSmart deconsolidation and potential disposal of Edotco," HLIB said.
HLIB has increased its earnings forecasts for the financial years 2025 to 2027 by between 2 per cent and 15 per cent, incorporating updated management guidance and refined assumptions.
It noted that the second quarter of 2025 (2Q25) results and headline earnings could be impacted by several one-off factors, including the deconsolidation of XLSmart, gains from the sale of Axiata's XLSmart stake to Sinar Mas, potential losses from the divestment of Edotco Myanmar, and fluctuations in foreign exchange.
"While earnings are likely to remain lacklustre in the near term, we believe the market will respond positively to management's efforts to unlock value across its telco portfolio and reinforce its balance sheet in the process," the firm said.
HLIB described the potential monetisation of Axiata's stake in Edotco as a significant near-term catalyst that could drive a re-rating of its share price. It maintained a 'Buy' recommendation on the stock, with a target price of RM2.50.
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