Analysts: Axiata’s telco tower business valued at US$ billion
KUCHING: Axiata Group Bhd’s ( Axiata) 62 per cent owned telecommunic at ion tower business – Edotco Group Sdn Bhd (edotco) – could easily be valued at US$ 2 billion, according to AmInvestment Bank Bhd.
In a company report, the bank said Axiata’s edotco showed commendable growth from its expanding portfolio and operation performance with its financial year 2017 (FY17) revenue growing by an impressive 11.8 per cent.
“The growth is driven by higher tenancy across all footprint and maiden contribution from acquisit ions in Pakistan,” the bank said in its report yesterday.
Expanding inorganically via acquisitions, edotco’s FY17 capital expenditure growth rose by 3 per cent year over year (y- oy) to RM416 million.
As at 4QFY17, the company’s ownership of towers grew 9 per cent y- o-y to 16,500, its sites under management rose by 7 per cent y- o-y to 10,900, and its tenancy ratio in 4Q17 rose to 1.6 fold from 1.4 fold in 4Q16.
Axiata was rumoured to be exploring the potential of listing edotco and should they go through with it, AmInvestment Bank expected edotco’s IPO to do well as previous acquisitions of edotco stakes have seen high valuations.
According to bank, the company’s other stakeholders are Innovative Network Crop of Japan ( INCJ) at 22 per cent, Khazanah Nasional ( Khazanah) at 11 per cent and KWAP at 5 per cent.
“KWAP’s acquisition of its stake edotco in April 2017 values its equity at US$1.5 billion, based on the same benchmark set for the private placement to INCJ and Khazanah back in December 2016.
“However, based on an average FY18F EV/ EBITDA of 16 fold for the 5 largest global listed tower companies and assuming debt of US$ 500 million, we estimate that edotco could easily be valued at US$ 2 billion, which would potentially raise Axiata’s sumof-parts (SOP) by 13 per cent to RM7.45 per share,” opined the bank.
With no confirmation from Axiata that an IPO for edotco might take place yet, AmInvestment Bank’s current SOP valuation for Axiata has not incorporated any DCF from edotco.
“Instead our valuation is premised the potential valueenhancing re- merger with Telecom Mal aysi a which could opt imise synergies wh i le na r r owi n g the valuation dif ferential with peers and re- catalysing its earnings prospects,” guided the bank.
Adding to this, the bank also highlighted that they had also taken into consideration that Axiata’s RM1.2 to RM1.8 billion noncash impairment upon completion of the impending IdeaVodafone merger by the first half of FY18, but deemed the develop to not have any substantive impact to the group’s FY18F normalised earnings.
All in, AmInvestment Bank is maintaining its ‘ buy’ call on Axiata with an unchanged fair value RM6.60 per share.