Axiata announced its results for 1Q2009 ended 31/3/2009 yesterday. Its net profit dropped 84% y-o-y from RM403 million to RM64 million on the back of a 5.3%-increase in turnover from RM2.72 billion to RM2.87 billion. If viewed from only this angle, then the turnaround story of Axiata would have been lost. Axiata had recovered from a horrendous quarter in 4Q2008 where it incurred a net loss of RM515 million on the back of a turnover of RM2.42 billion. The poor results of 4Q2008 was attributable mainly to adverse currency movement.
Table 1: Axiata's 8 quarterly results
From Table 2, we can see the turnaround in Axiata's Indonesian & Bangladeshi operation as well as sharply lower losses in its Sri Lankan operation plus higher profit from its domestic operation led to a turnaround in Axiata's operating results from an operating loss of RM143 million in 4Q2008 to an operating profit of RM493 million in 1Q2009. Axiata's other operating income increased from RM44 million in 4Q2008 to RM172 million in 1Q2009, boosted by a one-off gain of RM103 million arising from the de-recognition of its dark fibre optic line as a results of a finance lease arrangement. Finally, Axiata has also benefited from lower loss contribution from Dialog & jointly controlled entity. All these resulted in Axiata reporting a pre-tax profit of RM191 million as compared to a pre-tax loss of RM668 million previously.
Table 2: Axiata's detailed P&L account for 5 quarters
One of the main problem that I have with Axiata previously was its poor financial position. I have remarked that this will hardly improved even after the RI of 4.692 billion shares at RM1.12 each. However, on closer examination, that may not be the case. I have re-computed the current & gearing ratio (after the RI proceed has been received). Current ratio would improved from 0.70 to 1.21 times, while gearing ratio would drop from 1.67 to 0.95 times. Liquidity position is satisfactory, while solvency may be a bit high but should improve with cash inflow generated.
Table 3: Axiata's Financial Position as at 31/3/2009 (& adjusted for RI)
Technical Outlook
As noted previously, Axiata's technical outlook has turned positive as the stock jas broken above its downtrend line. Also, you can see that its 20-day SMA has crossed above its 50-day & 100-day SMA.
Chart: Axiata's daily chart as at 19/5/2009 (Source: Tradesignum)
Conclusion
Based on the improved financial performance & position as well as bullish technical outlook, Axiata is a good stock for long-term investment.
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