Latest news with #Edotco
The Star
5 days ago
- Business
- The Star
Axiata on track to pare debt, sustain dividends
PETALING JAYA: BIMB Research has maintained its 'buy' call on Axiata Group Bhd despite the recent surge in the telecommunications company's stock price. The research house told clients its target price has been raised to RM3 from RM2.50, based on a sum-of-parts valuation. 'We currently assume tower subsidiary Edotco Group Sdn Bhd's valuation at US$3.5bil or around RM14.9bil as our base case, which implies an enterprise value to earnings before interest, taxes, depreciation and amortisation multiple of nine times. 'We think this is fair as previous transactions also traded in the range of nine to 11 times. Key risk to our recommendation and target price is the failure to dispose of Edotco or if it is sold at a lower valuation than we have assumed,' the research house said. At last look, Axiata was trading at RM2.52. The research firm noted Axiata was getting closer to disposing of its 63% equity stake in Edotco following the completion of the disposal of Edotco's Myanmar tower operations for US$90mil recently. 'The upcoming disposal of Edotco is in line with its asset monetisation strategy to create a sustainable dividend company by next year. For now, the company is committed to paying annual dividends per share of 10 sen, which implies a dividend yield of 3.9%. 'The company plans to use the proceeds of any disposal to pare down the holding company's debt and thus allow it to progressively increase dividend payouts in future.' The research house said the debt reduction exercise was timely, given that Axiata had been benefiting from higher yields on US long-dated bonds. 'Last year, the company had realised a gain of RM306mil by making partial early redemption of European Medium Term Notes (EMTNs) for a principal amount of US$272.1mil for only US$200mil. 'We estimate that the company can realise a gain of another RM1bil from making full redemption on RM3.2bil of remaining EMTNs outstanding,' BIMB Research said.
The Star
6 days ago
- Business
- The Star
Axiata's Edotco stake key to balance sheet strength
PETALING JAYA: Axiata Group Bhd 's efforts to strengthen its balance sheet could gain traction if it decides to monetise its 63% stake in tower subsidiary Edotco Group Sdn Bhd – a move that could yield between RM3.2bil and RM8.3bil, according to Maybank Investment Bank Research (Maybank IB). In a recent report, the research house noted that Axiata's balance sheet leverage remains a major overhang, with its net debt-to-earnings before interest, tax, depreciation and amortisation (Ebitda) staying 'elevated' at about three times as at the end of the first quarter of 2025 (1Q25). Maybank IB simulated a full disposal of Edotco at an enterprise value-to-Ebitda multiple of seven to 12 times. It estimated that a full divestment could reduce Axiata's net debt-to-Ebitda to between zero and 1.6 times. 'Our simulation indicates a significant improvement to Axiata's gearing if it hypothetically divests its entire stake in Edotco,' the investment bank said. Although Axiata is undertaking other corporate exercises – including the XL-Smartfren merger and the divestment of its Myanmar tower operations in the second quarter of 2025 – these are unlikely to materially shift the group's leverage profile, Maybank IB said. Notably, Edotco itself carries a relatively high net debt-to-Ebitda ratio of 3.9 times and remains a material contributor to Axiata's consolidated gearing, it said. As part of its broader strategy, Maybank IB said Axiata has already identified Edotco as one of its monetisable assets. It maintained its 'buy' call on the stock, with an unchanged target price of RM2.90 a share. 'We continue to view Axiata's overall risk-reward as positive, with net profit recovery and balance sheet repair (increasingly gaining traction among investors) being potential re-rating catalysts,' Maybank IB said.
New Straits Times
25-06-2025
- Business
- New Straits Times
Axiata's Myanmar tower sale sparks Edotco monetisation talk
KUALA LUMPUR: Axiata Bhd's sale of its tower assets in Myanmar could set the stage for the monetisation of its subsidiary, Edotco, amid reports that a consortium comprising Khazanah Nasional Bhd and the Employees Provident Fund (EPF) is eyeing Axiata's 63 per cent stake, valuing the deal at around US$3.5 billion. 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.
New Straits Times
16-05-2025
- Business
- New Straits Times
Analysts expect Axiata's core earnings to remain subdued until FY2027
KUALA LUMPUR: Analysts are projecting subdued core earnings per share (EPS) for Axiata Group Bhd in the financial years 2025 and 2026, citing anticipated losses from XLS following its consolidation with Smartfren and costs related to merger integration. According to CIMB Securities, Axiata's EPS is expected to only exceed pre-merger levels by the financial year 2027 (FY27), as the group begins to realise the full benefits of synergies stemming from the merger. "Nevertheless, we have kept our 'Buy' rating with a 19 per cent lower target price (TP) of RM2.60 post earnings revision and lowering Edotco's enterprise value to earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA) target multiple to 8 times from 10 times (-22 sen). "We see potential asset monetisation initiatives in the next 12 to 18 months as a re-rating catalyst," it said. CIMB Securities stated that based on an enterprise value of US$3.5 billion or RM15.1 billion, Edotco is reasonably valued at a financial year 2024 (FY24) EV/EBITDA multiple of 8.4 times. It said after accounting for a pro forma net debt of RM4.6 billion at end-FY24, which includes expected proceeds from the pending US$150 million sale of Edotco Myanmar (EMM), the estimated equity value comes to RM10.5 billion. "Thus, Axiata could receive RM6.6 billion in cash (72 sen per Axiata share) for its 63 per cent stake. If entirely used to repay debt, we estimate interest cost savings of RM218 million, which will largely offset the removal of Edotco's earnings contribution," it added. The firm said Axiata's ability to pay dividends per share (DPS) could increase to 12.3 sen in FY26, compared to its current estimate of 10.5 sen. This potential increase is mainly due to lower interest payments on Axiata's holding company (HoldCo) debt, which are expected to more than offset the loss of relatively small dividends from Edotco, estimated at RM32 million to RM83 million between FY25 and FY27. "In turn, this may result in Axiata raising its DPS from FY26, a year ahead of our expectations. Balance sheet-wise, HoldCo debt may fall from RM9.5 billion at end-FY24 to just RM1.4 billion by end-2025, with group net debt/EBITDA at 1.0 times. Alternatively, Axiata could also pay out part of the sale proceeds in the form of a special DPS," CIMB Securities said. The firm has updated its FY25-FY27 core net profit forecasts for Axiata based on the operating companies' 2024 results and recent mergers, including the Dialog-Airtel merger completed in June 2024 and the XLS merger in April 2025. It also factored in the structural shift in Indonesia, with Link Net's B2C business transferring to XL in the third quarter of 2024. "Post revisions, we now forecast Axiata's core net profit (from continuing and discontinuing operations) to decline 49 per cent year-on-year (YoY) to RM439 million in FY25 and then recover by 71 per cent YoY to RM750 million in FY26, albeit still remaining below the FY24 level (RM852 million). "We only expect Axiata's core net profit to climb above pre-XLS merger levels in FY27, with a further 68 per cent YoY growth to RM1.26 billion," CIMB Securities added.
