STOCK FOCUS OF THE DAY
Axiata Group : Embedding edotco’s valuations
BUY
We maintain our BUY call on Axiata Group (Axiata) with an
unchanged sum-of-parts-based fair value of RM6.30/share, which translates to a
FY17F EV/EBITDA of 6.7x, half of Singapore Telecommunications (SingTel).
Axiata has entered into a share subscription agreement to place out additional
137mil edotco Group shares or 5.4% stake to Kumpulan Wang Persaraan (KWAP) for
US$100mil (RM441mil) cash. The inclusion of KWAP brings edotco’s equity private
placement to US$700mil while reducing Axiata’s stake in edotco to 62.4% from
68%. This placement to KWAP values edotco’s equity at US$1.5bil based on a FY16
EV/EBITDA of 12.5x, the same benchmark set for the private placement to INCJ
and Khazanah back in late December 2016. These valuations are slightly below
the FY17F EV/EBITDA average of 16x for the 5 largest listed tower companies,
ranked by market capitalisation.
As the listing of edotco has yet to be finalised, we have
not assumed any valuation for edotco in our SOP, which could be raised by
RM0.75/share or 12% to RM7.05/share. We remain positive on Axiata’s plans to
unlock edotco’s value and degear its high net debt/EBITDA of 2x, which will
alleviate the group’s additional capex requirement to roll out 4G connectivity
and spectrum acquisitions in its multiple geographical operations. Axiata
currently trades at a bargain FY18F EV/EBITDA of 6x, way below its 2-year
average of 8.1x and less than half of SingTel’s 14x. We continue to be bullish
on the stock on expectations of a value-enhancing re-merger with TM, which will
continue the re-rating process to bridge the valuation gap with SingTel.
Others :
Petronas Chemicals Group : New INA production
mitigates cyclical
swings
HOLD
Press Metal : Shiny outlook priced to
perfection
HOLD
Malaysian Pacific Industries : Smartphone consumers seen
holding off
spending
HOLD
QUICK TAKE
Sime Darby : Repurchases US$800mil
sukuk
HOLD
STOCKS ON RADAR
Press Metal,Seacera Group,Tex Cycle Technology,Mudajaya
Group
ECONOMIC HIGHLIGHT
Malaysia : A healthy labour market
NEWS HIGHLIGHTS
REITs : AmanahRaya REIT’s fund size projected to double
Property Sector : S P Setia to develop RM1.4bil luxury condo
in Singapore
Infrastructure Sector : Feasibility study on Kulim airport
to conclude in next few months
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