AXIATA focusing on its core business

Axiata Group Bhd
(July 20, RM4.08)
Reiterate outperform at RM4.10 with target price of RM4.52: We reiterate our outperform recommendation with our fair value pegged at RM4.52 based on a sum-of-parts valuation which translates into a PER of 14.4 times based on FY2010 EPS of 31.45 sen.

Axiata entered into an agreement with Adnan Asdar Ali (current CEO of Multinet Pakistan) to dispose of the former’s entire shareholding of 89% in Multinet Pakistan (Private) Limited (Multinet) for a total cash consideration of US$15 million (RM48.3 million). Adnan is expected to repay the PKR973.3 million (RM36.7 million) which Axiata advanced to Multinet. Axiata will also be free from all guarantees and financial support provided to Multinet amounting to US$65 million.

The move is in line with Axiata’s divestment of non-core business. To recap, Multinet was part of a TM subsidiary that was divested to TMI during the demerger of TM to TMI and TM.

The deal will have a minimal impact on Axiata as Multinet accounts for 0.58% and 1.2% of Axiata’s FY2009 revenue and net profit.

Possible potential divestment of other non-core business could be Samart Corp in Thailand (dealing with the sale of mobile phone bundled with mobile multimedia) and MTCE in Iran which is suffering from limited growth because it has an operating licence in Esfahan province. — Inter-Pacific Research Sdn Bhd, July 20