AXIATA: Core Profit Meets Expectations Amidst Cost Efficiencies, Buy Rating Maintained

A leading telecommunications group reported its interim half-year 2025 (IHFY25) core profit of RM156.0 million, which was deemed to be within both analyst and consensus full-year estimates. This performance was largely attributed to ongoing cost-optimisation efforts and improved operational efficiencies, despite a challenging revenue landscape during the period.

Performance Review

The group’s IHFY25 core profit accounted for 23.6% and 25.1% of TA Securities’ and consensus full-year estimates, respectively. While overall revenue experienced a 10.0% year-on-year (YoY) decline to RM5,858 million, primarily due to adverse foreign currency translation impact, revenue on a constant-currency basis saw a more modest 0.9% dip. This decline was broad-based, affecting most operating companies (OpCos) except Boost, Dialog, and Smart, which demonstrated robust growth. Boost’s revenue surged 48.3% driven by higher interest income from loan disbursements, Dialog grew 5.9% due to Airtel’s revenue consolidation, and Smart expanded 3.0% fueled by strong prepaid data revenue.

Earnings Before Interest and Taxes (EBIT) softened by 26.3% YoY to RM700 million, impacted by softer top-lines. However, the core profit saw a 13.8% increase, supported by enhanced cost efficiencies and stronger contributions from Robi, Dialog, and EDOTCO. Quarter-on-quarter (QoQ), 2QFY25 revenue improved 2.6% to RM2,966 million, with all OpCos contributing positively save for Linknet. Coupled with further cost-optimisation efforts, core profit for the quarter dramatically surged by 365.1% to RM128.0 million.

Future Outlook and Strategic Focus

Management anticipates a stronger second half of the year, driven by continued market repair in frontier markets and sustained cost-optimisation efforts. The group remains committed to integrating its Indonesian operations (XL and Smartfren) and realizing synergies between Dialog and Airtel in Sri Lanka. Furthermore, a strategic focus is on monetizing infrastructure assets, with EDOTCO identified as a key asset for potential divestment. Early signs of market recovery have been observed in key frontier markets, including Sri Lanka, Bangladesh, and Indonesia, indicating a more positive operating environment ahead.

Investment Recommendation

TA Securities maintains its “BUY” recommendation for the stock, with an unchanged target price of RM3.09. This valuation is based on a Sum-of-the-Parts (SOTP) methodology, incorporating a 3% ESG premium. The target price represents a 19.8% upside from the last traded price of RM2.58.