JF Apex Securities Bhd maintains its buy call for Axiata Group Bhd with a lower target price of RM3.93 from its previous RM4.15.
The group’s reported profit after tax and minority interests (PATAMI) for the second quarter ended June 30, 2020 (2Q20) plunged 58% year-on-year to RM80 mil from last year’s RM220.5 mil.
Its revenue dropped slightly to RM5.7 bil compared to RM6.1 bil in 2Q19 due to effects of the Covid-19 pandemic and higher losses from its digital business, attributed to the e-Tunai Rakyat contribution.
“Amid Covid-19, management estimates revenue loss of RM400 mil and has handed out RM80 mil in CSR assistance,” JF Apex Securities analyst Lee Cherng Wee said in an August 28 note.
Although the group felt the full impact of the Covid-19 pandemic, Lee said that signs of growth and recovery are in sight.
According to JF Apex Securities, the group faced a challenging first six months of 1H20 as its PATAMI dropped 72% y-o-y to RM268 mil, while the underlying PATAMI declined 62% y-o-y to RM166 mil.
This was mainly due to one-off items, namely Celcom employee restructuring costs (RM77 mil) and XL’s gain from tower sale (RM299 mil) as well as forex loss (RM103 mil), totalling its revenue 2.3% lower y-o-y at RM11.8 mil.
“Net debt/EBITDA inched up to 2.06x versus 2.05x in 1Q20,” Lee said. “The group’s 1H20 revenue and EBITDA came within forecasts, but PATAMI of RM166 mil only achieved 23% of our full year forecast.”
Lee also expects Axiata’s earnings growth to accelerate in 2H20 with lockdowns being lifted and economies restarting.
“We are reducing our FY20 EPS forecast by 31%, following the higher-than-expected loss in -digital business as well as higher tax rate,” he added.
As of 10.16 am, Axiata Group Bhd’s share price dropped by 0.32% to RM3.12, with a market capitalisation of RM28.52 bil.
