Axiata adopts various measures for profit growth

Kenanga Research says firm’s long-term vision remains unchanged

PETALING JAYA: Axiata Group Bhd will be emphasising on profitable growth and cash focus over the next two years by adopting various cost transformation, network monetisation and digitalisation plans.

Kenanga Research said in a report yesterday Axiata’s long-term vision to become a next generation digital leader remains unchanged despite continued operational challenges.

“However, in view of the rapid change in the global and national macro coupled with the local industry and regulatory factors, management has decided to emphasise on profitable growth as well as cash focus over the short-term period.”

Key strategies include focusing on profit growth relatively more than revenue or market share growth; spotlight on operating expenditure (opex) and capital expenditure (capex); prioritisation of investments with long payback.

The others are fund investments in new growth areas via strategic partnerships and financial investors; monetising existing investments for cash and validation; accelerating structural changes and impairment of non-productive assets.

AmInvestment Bank pointed out that Axiata is also targeting RM5bil savings over the next five years, of which 54% stems from capex and opex.

“This will largely drive the group’s fiveyear earnings before interest, tax, depreciation and amortisation (Ebitda) improvement target of 300 basis points against the backdrop of declining data yields and rising overseas regulatory costs.

“Meanwhile, management views that the market has undervalued its digital investments, in which the group has invested US$197mil (RM825mil) in Axiata Digital’s businesses, which have registered gross revenues of RM170mil in the nine months ended September 2018.

On its RM5bil cost-improvement plan over the next five years, Kenanga Research said this strategy will be anchored around three functional areas (namely operational, structural and transformational in network and IT; sales and marketing and other functions) in different stages.

“Management believes a net 300 basis points EBITDA improvement is likely to be achieved by 2022 after all the planned investments,” the research house said.

On Monday, Axiata announced that its net profit fell to RM132.07mil for the third quarter ended Sept 30, 2018 from RM238.53mil recorded in the same period last year.

Revenue also declined to RM6bil from

RM6.2bil previously.

During the quarter under review, the company said the ringgit strengthened against all regional currencies, leading to an adverse foreign exchange translation impact on its headline performance.

It said profit after tax and minority interest declined 44.6% to RM132.1mil in view of higher unrealised forex loss from the translation of US dollar-denominated loan and higher finance cost.

On its outlook, Axiata expects its performance to be generally in line with its headline key performance indicators.

Assuming constant currency, Axiata said it expected revenue to grow 6.3% for financial year 2018, while earnings before interest, tax, depreciation and amortisation is anticipated to grow 5.8%.