Axiata is ripe for some profit-taking

Results Update

Axiata has just announced its results for QE31/3/2010. Its net profit increased by 65% q-o-q or 13-fold to RM921 million while turnover increased by 3% q-o-q or 31% y-o-y to RM3.812 billion. The improved bottom-line was attributable to the following factors:
i) one-off gain on disposal of shares in XL of RM307.5 million; and
ii) one-off gain arising from the completion of the merger of Spice & Idea of RM173.2 million.
If these one-off gains are excluded, Axiata's bottom-line would actually drop when compared to the immediate preceding quarter (QE31/12/2009).


Table 1: Axiata's last 8 quarterly results


Chart 1: Allianz's 13 quarterly results

Valuation

Axiata (closed at RM3.77) is now trading at a PER of 9.2 times (based on last 4 quarters' EPS of 30 sen). However, if we exclude the aforementioned one-off gains of RM480 million, the last 4 quarters' EPS would be about 24 sen. On this basis, Axiata's PER would be about 15.7 times. As such, I believe Axiata is trading at its fair value.

Technical Outlook

Axiata has been consolidating in a "flag" formation over the past 3 months. Recently, it tested the 100-day SMA line & rebounded. That rebound was checked by the 50-day SMA line yesterday. I think Axiata will continue to drift & retest the 100-day SMA line at RM3.63 and, if this support failed, it might test the 200-day SMA line at RM3.36.


Chart 2: Axiata's daily chart as at May 31, 2010 (Source: Tradesignum)

Conclusion

Based on unexciting valuation and mildly bearish technical outlook, Axiata is deemed a candidate for some profit-taking.