Analysts have expressed varying opinions on Axiata Group Bhd following its commendable third-quarter (3QFY24) performance with BUY and NEUTRAL calls, marked by robust earnings recovery and improved balance sheet metrics.
Maybank Investment Bank Bhd (Maybank IB) maintained a BUY call on Axiata with an unchanged target price of RM3.20, citing the group's strong sequential net profit growth despite currency headwinds. Meanwhile, RHB Investment Bank Bhd (RHB Research) reiterated its BUY rating, raising its target price to RM3.40, reflecting a 45% upside, while MIDF Amanah Investment Bank Bhd (MIDF Research) retained its NEUTRAL stance with a revised target price of RM2.44.
Axiata's 3QFY24 core net profit surged to RM228 million, a 78% quarter-on-quarter and 200.2% year-on-year increase. This brought the cumulative 9MFY24 net profit to RM551 million, a 116% improvement from the previous year.
According to Maybank IB, the earnings exceeded consensus forecasts, with significant contributions from cost-rescaling efforts in subsidiaries such as Dialog in Sri Lanka and Robi in Bangladesh, which achieved sequential EBITDA growth. However, XL in Indonesia underperformed due to pricing pressures, and the Myanmar operations, under edotCo, faced delays in asset sales due to regulatory approvals.
RHB Research highlighted Axiata's net debt-to-EBITDA ratio improvement to 2.59x in 3QFY24, down from 3.17x in the previous year, driven by early Eurobond redemptions and stronger EBITDA contributions. Analysts pointed to macroeconomic tailwinds, operational efficiencies, and merger synergies—such as those with CelcomDigi and ongoing merger developments with Smartfren in Indonesia—as significant catalysts for further growth. These initiatives are expected to optimise spectrum usage and create scale advantages in a highly competitive telecommunications landscape.
Conversely, MIDF Research flagged potential earnings risks in Bangladesh due to civil unrest and market softness in Indonesia, coupled with increased depreciation and competitive pressures. While the group's revenue and EBIT grew 3.3% and 37% year-on-year for the first nine months of 2024, MIDF Research remained cautious about Axiata's exposure to volatile markets, foreign exchange risks, and geopolitical uncertainties. The research house adjusted its target price to RM2.44 from RM2.56 to reflect these challenges.
Maybank IB raised its FY24 to FY26 net profit forecasts for Axiata by 9%, 4% and 3%, respectively, citing lower capital expenditure in edotCo and higher interest income as key factors. It also noted that Axiata's commitment to a minimum annual dividend per share of 10 sen remains intact, which could further support investor confidence.
Despite the contrasting views, analysts generally recognised Axiata's ongoing focus on deleveraging its balance sheet, enhancing operational efficiencies and leveraging its diverse telecommunications portfolio across Asia. While RHB Research and Maybank IB see upside potential supported by improving fundamentals, MIDF Research remains more reserved, reflecting differing risk assessments for Axiata's growth trajectory in volatile markets.
