KUALA LUMPUR: Axiata Group Bhd's profit and revenue could weaken sizeably as a result of the huge protests across Bangladesh, which had escalated into deadly violence last week.
Bangladesh is one of the key markets for Axiata through its 61.8 per cent-owned Robi and 63.0 per cent-owned edotco.
Some analysts have estimated that one week of revenue loss from Robi may weaken Axiata's net profit by up to 3.0 per cent.
Robi is Bangladesh's second largest mobile network operator with a 31 per cent subscriber market share, after Grameephone Ltd's 43 per cent.
In 2023, Robi contributed 11.9 per cent to Axiata's revenue, 21.0 per cent to earnings before interest, taxes, depreciation and amortisation (Ebitda) and 20.2 per cent to normalised net profit.
Axiata's net profit could fall by 2.5-3.0 per cent from a week loss of revenue from Robi, said Affin Hwang Capital, adding that Bangladesh is an important market for edotco, with about 50.4 per cent of the latter's telco towers located in the country.
The revenue from Bangladesh accounted for 29.7 per cent of edotco's 2023 revenue.
"Bangladesh is predominantly a prepaid market where prepaid subscribers accounted for 98 per cent of Robi's mobile subscribers. As such, the temporarily suspension of mobile internet services may weaken Axiata's short-term profitability," the firm said.
In 2023, Robi reported an average revenue of RM11.3 million per day.
Affin Hwang, however, does not expect that the telecommunication blackout in Bangladesh will impact edotco's short-term revenue, as it is secured by long-term contracts
The firm kept Axiata's earnings forecasts for 2024-2026 unchanged for now, pending further updates on the situation in Bangladesh.
Last week, massive protests in Bangladesh escalated into deadly violence.
Although the situation was brought "under control" on Monday following the rollback of controversial quotas, demonstrators continue to make additional demands.
Business Times has reached out to Axiata for comments.
Meanwhile, Affin Hwang said the unrest in Bangladesh is a stark reminder of the country risks associated with the frontier markets Axiata operates in.
As the Bangladeshi currency, taka, is managed under a crawling peg exchange rate system, the firm does not expect the protests to have immediate impact to the currency.
However, it said the unrests and Bangladesh's weak macroeconomic outlook may affect investors sentiment,
Affin Hwang reduced Axiata's 12-month price target from RM2.85 to RM2.60, after lowering its target enterprise value and Ebitda multiples for Robi and edotco. This is in view of the heightened country risks and market uncertainties there.
The firm maintained a "Hold" call on Axiata, as it expects the uncertainties in Bangladesh and its heavy balance sheet to cap further share price recovery.
"We are also mildly cautious on Axiata's proposed corporate actions, such as in-country consolidation in Indonesia and Sri Lanka, edotco portfolio rationalisation, delayering of Indonesia involving XL and Link Net.
"This in view of the difficulties in striking a balance between de-gearing while maintaining a long-term growth trajectory under the current market environment," it said.
Looking ahead, Affin Hwang noted that the upside risks for Axiata include stronger-than-expected earnings delivery and improvements in regional economic conditions.
Meanwhile, downside risks include weaker-than-expected earnings due to increased competition or lower average revenue per user, deterioration in regional economic conditions, and negative regulatory surprises from its overseas operations.
Axiata shares closed three sen or 1.19 per cent lower to RM2.50 yesterday, giving it a market capitalisation of RM22.61 billion.