AXIATA: Core Earnings Below Forecasts, Target Price Lowered

The company’s core net profit for 2025 significantly underperformed expectations, declining by 39% year-on-year to RM455 million, falling short of both analyst and consensus forecasts. This shortfall was primarily driven by a 38% year-on-year revenue decline to RM14 billion, largely attributable to the absence of XL’s contribution and weaker performances across various operating companies.

Performance Review

Sequentially, the fourth quarter of 2025 saw a modest 2% quarter-on-quarter revenue increase to RM3 billion, bolstered by improved contributions from Robi (+1% QoQ), Smart (+4% QoQ), and Edotco (+5% QoQ). Edotco’s particularly strong performance in Malaysia, the Philippines, and Pakistan supported this growth. However, these gains were partially offset by a substantial 20% quarter-on-quarter decline in revenue from Link Net, primarily due to softer broadband and broadcasting contributions, and a 1.5% quarter-on-quarter dip from Dialog, exacerbated by LKR depreciation against the RM. The company’s softer-than-anticipated performance across key markets was a principal contributor to the overall earnings miss. Management, however, has projected high single-digit EBIT growth for 2026.

Future Outlook and Investment Stance

Despite clear growth and operational benefits anticipated from the company’s “5×5” and “Axiata28” strategies, the near-term outlook is tempered by several factors. These include ongoing exposure to frontier markets, earnings volatility stemming from macroeconomic headwinds, currency fluctuations, and persistent regulatory risks. Consequently, analyst forecasts for 2026-2027E Earnings Per Share (EPS) have been cut by 2-8% due to revised weaker growth assumptions across key markets. The investment bank maintains a HOLD rating on the stock, with a revised, lower 12-month target price of RM2.48, down from RM2.56, derived using a discounted cash flow (DCF) methodology.