KUALA LUMPUR: Axiata Group Bhd's (Axiata) operating companies (OpCos) should continue their growth trajectory from subs growth as the regional economies continue to recover from the pandemic.
Kenanga Research said Axiata Digital Services (ADS) would continue to post strong revenue growth.
Its analyst Lim Khai Xhiang said this would be driven by recovery in merchant transactions, higher digital marketing spend and continued growth in users.
"At the current rate of margin improvement, ADS should be profitable by financial year of 2022," he said in a research report today.
Lim said edotco Group Sdn Bhd may look for opportunities to acquire assets across its operating countries, including in Malaysia.
"We think a deal is likely on the table, but we think the rumoured RM1.8 billion price tag Touch Matrix is asking for is a hefty price, as that implies an earnings before depreciation and amortisation (ebitda) of over 32 times, which is unjustified for about 460 towers in Pahang."
Kenanga Research has raised Axiata's financial year 2021 (FY21) guidance after posting a strong nine-month (9M) performance.
"We raised FY21/FY22 earnings by 21 per cent and 12 per cent, while maintaining a target price of RM4.20 on concerns of worsening mobile competition in Malaysia and reduced enterprise service differentiation on the 5G single wholesale network (SWN).
"We continue to think that the SWN will potentially bring stiffer mobile competition and reduced differentiation in the enterprise offerings, and thus could act as a de-rating catalyst on Malaysian mobile network operators, weighing on Axiata's Celcom Digi stake."
Kenanga Research said Axiata's 9MFY21 beat our expectation, as costs were lower than expected, while revenue across OpCos (except NCell) continued growing on subs growth.
"XL's due diligence on LinkNet is still on-going, with management hoping to sign a sales and purchase agreement before year-end.
"Without confirming rumours of edotco's potential acquisition of Touch Matrix, management points out that edotco is also looking to grow inorganically," it added.
