Axiata- likely to trade sideway

Results Update

For QE30/9/2009, Axiata's turnover increased by 6.9% q-o-q or 3.1% y-o-y to RM3.381 billion. Net profit dropped by 4.4% q-o-q to RM503.7 million but was more than double when compared to the net profit achieved in QE30/9/2008. Net profit dropped when compared to the immediately preceding quarter because lower forex gain of RM184.7 million (compared to RM532.1 million previously) and negative contribution from Axiata (Bangladesh) Ltd due to higher subscribers' acquisition cost, but was somewhat offset by lower depreciation charge in Dialog (the Group's Sri Lankan operations). (For more, go to the Star.)


Table 1: Axiata's 8 quarterly results


Chart 1: Axiata's 11 quarterly results

Valuation

Axiata recorded an EPS of 6 sen for QE30/9/2009 which includes a forex gain of RM184.7 million. If this is excluded, then its net profit is about RM319 million. Based on its issued share capital of 8445.154 billion of RM1.00 each, its EPS for QE30/9/2009 is about 3.8 sen. This would also give us an annualized EPS of 15.2 sen. Based on its closing price of RM3.07 yesterday, Axiata is now trading at a PE of 20.2 times. This is quite high but the market may accept this high PE because Axiata is viewed as a growth stock, due to its exposure to a few markets which is under-tapped (such as Indonesia & India).

Technical Outlook

Axiata has broken below its uptrend line in October and drifted to a low of RM2.90 before recovering. Despite the healthy rebound that ensued, the stock has failed to stay on its previous uptrend line. For now, the stock is likely to trade sideway between RM2.90 & RM3.20 until a technical breakout which will point the way for the price movement ahead.


Chart 2: Axiata's daily chart as at Dec 2, 2009 (Source: Tradesignum)

Conclusion

While the operating results for Axiata has improved considerably, the high valuation & the neutral technical outlook means that this stock is likely to be very dull for the next few months.