KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) which has a "Hold" call on Axiata Group Bhd's stock is positive on the merger of CelcomDigi Bhd for the group over the long term, but see regulatory and economic risks as major concerns.
"We like its regional exposures with focus on emerging countries which may deliver great growth potentials."Other potential corporate exercises that may unlock values include tower asset and digital businesses listings," it said in a note. HLIB has maintained a "Hold" call on Axiata, with an unchanged target price of RM2.71.
HLIB said the group's first quarter ended March 31, 2024 (1Q24) revenue of RM5.7 billion yielded a core net profit of RM190 million, matching its full-year estimate at 26 per cent but exceeding consensus at 28 per cent.
It said 1Q24 one-off adjustments included forex and derivative loss of RM106 million, XL tower disposal gain of -RM21 million andothers (RM45 million).
On a year-on-year (YoY) basis, HLIB noted that Axiata's top line grew five per cent, thanks to higher contributions from XL which rose 17 per cent), Robi (11 per cent), Dialog (five per cent), Smart (19 per cent), edotco (seven per cent), ADA (59 per cent) and Boost (nine per cent).
This was more than sufficient to offset the weakness in Link Net, which contracted two per cent.
HLIB said convergence continued positive trajectory as fixed broadband (FBB) subs increased to 252,000 as XL Satu escalates footprint across Indonesia with availability in 102 cities.
It added that headline key performance indicators (KPIs) for the financial year 2024 (FY24) are guiding for growth with a more prudent capex budget.
As such, HLIB has revised Axiata's profit after taxation and minority interests (PATAMI) up by four to five per cent for FY24-FY25 respectively.