Analysts expect Axiata's core earnings to remain subdued until FY2027
KUALA LUMPUR: Analysts are projecting subdued core earnings per share (EPS) for Axiata Group Bhd in the financial years 2025 and 2026, citing anticipated losses from XLS following its consolidation with Smartfren and costs related to merger integration.
According to CIMB Securities, Axiata's EPS is expected to only exceed pre-merger levels by the financial year 2027 (FY27), as the group begins to realise the full benefits of synergies stemming from the merger.
"Nevertheless, we have kept our 'Buy' rating with a 19 per cent lower target price (TP) of RM2.60 post earnings revision and lowering Edotco's enterprise value to earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA) target multiple to 8 times from 10 times (-22 sen).
"We see potential asset monetisation initiatives in the next 12 to 18 months as a re-rating catalyst," it said.
CIMB Securities stated that based on an enterprise value of US$3.5 billion or RM15.1 billion, Edotco is reasonably valued at a financial year 2024 (FY24) EV/EBITDA multiple of 8.4 times.
It said after accounting for a pro forma net debt of RM4.6 billion at end-FY24, which includes expected proceeds from the pending US$150 million sale of Edotco Myanmar (EMM), the estimated equity value comes to RM10.5 billion.
"Thus, Axiata could receive RM6.6 billion in cash (72 sen per Axiata share) for its 63 per cent stake. If entirely used to repay debt, we estimate interest cost savings of RM218 million, which will largely offset the removal of Edotco's earnings contribution," it added.
The firm said Axiata's ability to pay dividends per share (DPS) could increase to 12.3 sen in FY26, compared to its current estimate of 10.5 sen.
This potential increase is mainly due to lower interest payments on Axiata's holding company (HoldCo) debt, which are expected to more than offset the loss of relatively small dividends from Edotco, estimated at RM32 million to RM83 million between FY25 and FY27.
"In turn, this may result in Axiata raising its DPS from FY26, a year ahead of our expectations. Balance sheet-wise, HoldCo debt may fall from RM9.5 billion at end-FY24 to just RM1.4 billion by end-2025, with group net debt/EBITDA at 1.0 times. Alternatively, Axiata could also pay out part of the sale proceeds in the form of a special DPS," CIMB Securities said.
The firm has updated its FY25-FY27 core net profit forecasts for Axiata based on the operating companies' 2024 results and recent mergers, including the Dialog-Airtel merger completed in June 2024 and the XLS merger in April 2025.
It also factored in the structural shift in Indonesia, with Link Net's B2C business transferring to XL in the third quarter of 2024.
"Post revisions, we now forecast Axiata's core net profit (from continuing and discontinuing operations) to decline 49 per cent year-on-year (YoY) to RM439 million in FY25 and then recover by 71 per cent YoY to RM750 million in FY26, albeit still remaining below the FY24 level (RM852 million).
"We only expect Axiata's core net profit to climb above pre-XLS merger levels in FY27, with a further 68 per cent YoY growth to RM1.26 billion," CIMB Securities added.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Barnama
an hour ago
- Barnama
Cooperatives Urged To Implement Digitalisation Immediately To Remain Competitive
PUTRAJAYA, June 22 (Bernama) -- Coooperatives have been urged to implement digitalisation initiatives immediately and make full use of modern technology to ensure they remain competitive. Cooperatives Commission of Malaysia chairman Datuk Ahmad Norihan Jalal said the current business environment in Malaysia was challenging and required cooperatives to use technologies such as artificial intelligence (AI) and Internet of Things (IoT). 'We cannot be complacent, the business world will continue to change and cooperatives need to ride this wave of change. If cooperatives don't adapt, they will be left behind,' he said at a media conference after attending Koperasi Sahabat Amanah Ikhtiar Malaysia Berhad's (Koop Sahabat) annual general meeting here today. Ahmad Norihan said digitalisation would speed up various process in cooperatives, from internal administration to e-commerce, and will not only boost efficiency but open up more job opportunities. 'Digital transformation in cooperatives must be seen as a long term investment. AI, IoT and digital systems aren't new things,' he added. Ahmad Norihan praised Koop Sahabat for launching an AI-based virtual support system, YATI, that was capable of giving immediate feedback and speed up access for its members, stating that the cooperative was brave in being innovative. Meanwhile Koop Sahabat chairman Mohd Najib Mohd Noor announced a dividend of 10 per cent for the 2024 financial year involving a total of RM10.5 million for 449,848 members. 'Our revenue was rather high with a profit of RM37 million, about a 140 per cent rise from the previous year,' he said, adding that the Ar-Rahnu business was the highest contributor to the cooperative's revenue, followed by investments in real estate and housing projects. -- BERNAMA
The Sun
2 hours ago
- The Sun
Cooperatives urged to embrace digital tech for growth
PUTRAJAYA: Coooperatives have been urged to implement digitalisation initiatives immediately and make full use of modern technology to ensure they remain competitive. Cooperatives Commission of Malaysia chairman Datuk Ahmad Norihan Jalal said the current business environment in Malaysia was challenging and required cooperatives to use technologies such as artificial intelligence (AI) and Internet of Things (IoT). 'We cannot be complacent, the business world will continue to change and cooperatives need to ride this wave of change. If cooperatives don't adapt, they will be left behind,' he said at a media conference after attending Koperasi Sahabat Amanah Ikhtiar Malaysia Berhad's (Koop Sahabat) annual general meeting here today. Ahmad Norihan said digitalisation would speed up various process in cooperatives, from internal administration to e-commerce, and will not only boost efficiency but open up more job opportunities. 'Digital transformation in cooperatives must be seen as a long term investment. AI, IoT and digital systems aren't new things,' he added. Ahmad Norihan praised Koop Sahabat for launching an AI-based virtual support system, YATI, that was capable of giving immediate feedback and speed up access for its members, stating that the cooperative was brave in being innovative. Meanwhile Koop Sahabat chairman Mohd Najib Mohd Noor announced a dividend of 10 per cent for the 2024 financial year involving a total of RM10.5 million for 449,848 members. 'Our revenue was rather high with a profit of RM37 million, about a 140 per cent rise from the previous year,' he said, adding that the Ar-Rahnu business was the highest contributor to the cooperative's revenue, followed by investments in real estate and housing projects.
The Sun
4 hours ago
- The Sun
Malaysia–US tariff talks making good progress
KUALA LUMPUR: Malaysia's discussions with the United States (US) Trade Representative and the US Secretary of Commerce on ongoing tariff-related negotiations have made good progress, said Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz He said both Malaysia and US representatives have expressed their intention to finalise negotiations before the expiry of the 90-day pause on tariff implementation, and agreed to intensify efforts to reach an agreement acceptable to key stakeholders in both countries. In a statement today, he highlighted that the US has been one of Malaysia's top three export markets over the past decade. 'In May 2025, exports to the US recorded the eighth consecutive month of double-digit growth,' he said. A significant share of Malaysia's exports to the US supports and complements US domestic industries in sectors such as electrical and electronics (E&E), semiconductors, medical devices, machinery, equipment, and parts. Malaysia also serves as a key supplier of intermediate goods to US-based manufacturing industries. 'MITI has remained steadfast in upholding Malaysia's interests in all trade and investment relations, particularly in safeguarding the integrity of Malaysia's domestic commitments and sovereign rights,' he added. He further stated that MITI anticipates the negotiations will help secure Malaysia's supply chains and deliver positive spillovers to local businesses, especially small and medium enterprises (SMEs), while also creating more high-paying jobs for Malaysians. 'These efforts will further strengthen Malaysia's position as a preferred investment destination in the region and drive the MADANI economic transformation agenda towards becoming a high-tech, high-income nation,' said Tengku Zafrul. Tengku Zafrul led a working visit to Washington, US, from June 18-20, 2025. The visit focused on continuing US tariff-related engagement and negotiations with US Trade Representative Jamieson Greer and US Secretary of Commerce Howard Lutnick. He was accompanied by MITI's chief negotiator, the Deputy Chief of Mission from the Embassy of Malaysia, and MITI officials based in Washington.
