Company Spotlight: News Fueling Financial Insights

Axiata Sells Myanmar Assets at Discount Amid Political Risks

Axiata Group has completed the sale of its Myanmar tower operations for US$90 million, significantly lower than the initial US$150 million valuation, citing deteriorating political and economic conditions. The deal, executed via subsidiary edotco, reflects strategic adjustments to mitigate sanctions risks and operational challenges in Myanmar. Axiata’s exit aligns with its broader debt-reduction strategy, following its withdrawal from Nepal in 2023. The group retains core telecom assets in Malaysia, Indonesia, and other Asian markets while monetizing non-core holdings like edotco and Link Net. Shares fell 1.9% to RM2.06, extending a 14% YTD decline. The move underscores Axiata’s focus on stabilizing cash flows amid geopolitical headwinds.

Sentiment Analysis

✅ Positive Factors

• Debt Reduction: Proceeds (US$90M) strengthen balance sheet and support deleveraging.
• Risk Mitigation: Exit reduces exposure to Myanmar’s sanctions and operational instability.
• Strategic Focus: Retains high-growth core markets (e.g., CelcomDigi, XL Axiata).

⚠️ Concerns/Risks

• Lower Valuation: 40% discount reflects asset impairment and geopolitical risks.
• YTD Performance: Stock down 14%, signaling investor skepticism.
• Portfolio Shrinkage: Exits (Myanmar, Nepal) may limit regional diversification.

Rating: ⭐⭐⭐

Short-Term Reaction

📈 Factors Supporting Upside

• Cash inflow could ease debt concerns, potentially boosting investor confidence.
• Clarity on Myanmar exit removes uncertainty.

📉 Potential Downside Risks

• Market may view discounted sale as a sign of distress.
• Broader emerging-market telecom sector volatility.

Long-Term Outlook

🚀 Bull Case Factors

• Core markets (Malaysia, Indonesia) offer stable cash flows.
• Monetization of non-core assets (edotco, Boost) could fund growth initiatives.

⚠️ Bear Case Factors

• Geopolitical risks persist in other operating regions (e.g., Bangladesh, Sri Lanka).
• Intense competition in digital telco space may pressure margins.

Investor Insights

Recommendations:

• Value Investors: Monitor for further asset monetization at better valuations.
• Growth Investors: Focus on core markets’ digital expansion (e.g., CelcomDigi).
• Risk-Averse: Await clearer signs of stabilization in share price and debt metrics.

Business at a Glance

Axiata is a telecommunications company. It primarily provides mobile and infrastructure service and operates in four main geographic areas: Malaysia, Indonesia, Bangladesh, and Sri Lanka. Mobile services are derived through controlling interests in five mobile operators: Celcom in Malaysia, XL in Indonesia, Dialog in Sri Lanka, Robi in Bangladesh, and Smart in Cambodia. The company generates the vast majority of its revenue in Malaysia and Indonesia. It also owns mobile tower and fibre infrastructure and generates infrastructure revenue through its infrastructure company, Edotco.
Website: http://www.axiata.com

Unveiling Analysis: Opportunities and Risks Uncovered

Financial Performance Analysis

• Revenue Growth & Trends:

  • Axiata's revenue (TTM) stands at MYR 21.68B, with a 4.66% YoY growth in Q4 2024. However, Q1 2025 saw a -33.43% decline in market cap, reflecting investor caution.

  • Key anomaly: Q3 2024 revenue dipped due to currency volatility in emerging markets (Indonesia, Bangladesh).

  • Table: Revenue Trends (MYR B)

    Quarter	Revenue	YoY Growth
    Q1 2025	5.42	-2.1%
    Q4 2024	5.71	+4.66%
    Q3 2024	5.23	-1.8%

• Profitability:

  • Net margin improved to 4.8% in Q4 2024 (vs. 3.2% in Q4 2023), driven by cost-cutting in its Indonesian unit (XL Axiata).
  • Gross margin stabilized at 42% (5-year avg: 41%), but operating margin remains thin at 10% due to high infrastructure costs.

• Cash Flow Quality:

  • FCF yield: 5.2% (TTM), down from 6.1% in 2023, as capex rose for 5G rollout.
  • P/OCF of 2.20 (below 5-year avg of 3.0) suggests undervaluation relative to cash generation.

• Key Financial Ratios:

  • P/E: 18.59 (vs. industry 20.1) – slightly undervalued.
  • Debt/Equity: 1.8x (above peers’ 1.2x) – leverage concerns.
  • ROIC: 6.5% (below WACC of 8.1%) – capital efficiency needs improvement.

Market Position

• Market Share & Rank:
  • #2 in Southeast Asia telecom (after Singtel), with 18% market share in Malaysia (Celcom) and 12% in Indonesia (XL Axiata).
• Revenue Streams:
  • Mobile services (70% of revenue): Grew 6% YoY.
  • Digital (15%): Slowed to 3% growth (vs. 8% in 2023) due to competition from Grab and Gojek.
• Industry Trends:
  • 5G adoption: Axiata’s capex (MYR 3B annually) lags behind Maxis (MYR 4B).
  • AI integration: Partnered with Google Cloud for enterprise solutions (potential MYR 500M revenue by 2026).
• Competitive Advantages:
  • Cost leadership: Lowest data cost in Malaysia (MYR 0.05/GB vs. industry MYR 0.08).
  • Strategic assets: 28,000 towers (edotco) generate steady rental income.

Risk Assessment

• Macro Risks:
  • IDR/MYR volatility: 10% depreciation in 2024 hurt XL Axiata’s earnings.
  • Inflation: Rising energy costs (15% of opex) could squeeze margins.
• Operational Risks:
  • Debt/EBITDA: 3.5x (above safe threshold of 2.5x) – refinancing risks.
  • Quick ratio: 0.6x – liquidity concerns.
• Regulatory Risks:
  • Malaysia’s single 5G wholesale network (DNB) may limit pricing power.
• Mitigation:
  • Asset monetization: Selling 49% of edotco could raise MYR 4B (per May 2025 news).

Competitive Landscape

• Competitors:
  • Maxis (Malaysia): Higher ARPU (MYR 45 vs. Axiata’s MYR 38) but weaker FCF yield (3.1%).
  • Telkomsel (Indonesia): 40% market share vs. XL Axiata’s 12%.
• Disruptive Threats:
  • Starlink’s entry in Indonesia (2025) threatens rural broadband dominance.
• Strategic Moves:
  • Merger with Smartfren (Indonesia) aims to cut costs by MYR 1.2B/year (Q1 2025 announcement).

Valuation Assessment

• Intrinsic Valuation (DCF):
  • WACC: 8.1%, terminal growth: 2.5% → NAV: MYR 2.40/share (10% upside).
• Valuation Ratios:
  • EV/EBITDA: 6.2x (vs. peers’ 7.5x) – undervalued.
  • P/B: 0.70 (vs. 5-year avg 1.2) – margin of safety.
• Investment Outlook:
  • Catalysts: edotco IPO, Smartfren merger synergies.
  • Risks: Debt refinancing, 5G delays.
• Target Price: MYR 2.35 (12-month, 14% upside).
• Recommendations:
  • Buy: Value play (P/B < 1).
  • Hold: For dividend yield (4.93%).
  • Sell: If debt/EBITDA exceeds 4x.
• Rating: ⭐⭐⭐ (Moderate risk, balanced upside).

Summary: Axiata offers undervalued exposure to SEA telecom growth, but high leverage and competition require caution. Key watchpoints: edotco monetization and Indonesia merger execution.

Market Snapshots: Trends, Signals, and Risks Revealed