Axiata’s Q4 earnings per share to improve, says CIMB
PETALING JAYA: Axiata’s core earnings per share (EPS) for the fourth quarter of last year are likely to improve in its results that will be released next Friday.
CIMB Research expects it to increase by 20% to 30% quarter-on-quarter (q-o-q) or 40% to 50% year-on-year (y-o-y) mainly due to the cessation of equity accounting for Idea and an improvement in XL’s earnings.
It added that Celcom’s earnings were likely flat q-o-q as stronger EBITDA was offset by increased depreciation.
M1’s earnings contribution eased 26% q-o-q while earnings for Ncell and Smart were also likely flat or slightly lower q-o-q due to seasonality and regulatory charges.
The headline EPS may look weak for Axiata but CIMB Research said EPS in FY19F and future years would be boosted by lower depreciation on a smaller asset base.
“We believe Axiata’s Q4’18 headline EPS was hit by significant asset impairments at XL, Celcom, Robi and Ncell, mainly for 2G network assets and billing support systems.
“These are non-cash charges and should not impact dividend per share, which is based on normalised EPS,” it said in a research note.
CIMB Research has maintained its “add” call on Axiata with an unchanged target price of RM4.40.
It also pointed out that the capital gains tax (CGT) issue in Nepal over the Ncell acquisition is a negative news but has been priced in after a 3.2% drop in share price.
Ncell/Axiata are liable to pay CGT of 75 billion Nepalese rupees (RM2.69bil) including late payment fees.
Ncell had previously paid 23.6 billion Nepalese rupees (RM820mil), brining the net amount now to 51.4 billion Nepalese rupees (RM1.84bil).Should Axiata need to pay, CIMB Research said its target price will be reduced to RM4.20.
Meanwhile, the research house also expects Axiata to accept Keppel Corp and Singapore Press Holdings’ (SPH) offer of S$2.06 per share for M1 unless it is able to find a partner to fund a counterbid as M1 is a non-core asset. “If Axiata keeps its stake, there is a potential five sen downside to our SOP-based target price of RM4.40 as we revert back to a DCF-based valuation for M1 (i.e. S$1.50/share),” the research note said.