(Dec 27, RM4.73)
Maintain buy at RM4.70 with target price RM5.50: It was announced on Dec 22 that Axiata has completed the sale of its entire stake of 18.9% in Samart Corp (parent of Samart group) to existing shareholders. The stake, which Axiata has held since 1997, was transacted for a total cash consideration of US$34.8 million (RM108.4 million). Axiata, however, still holds its 24.4% stake in Samart i-Mobile, a subsidiary of Samart Corp.
Samart group has three areas of interest. They are i) ICT solutions, ii) mobile-multimedia and iii) technology-related solutions. Samart i-Mobile’s area of interest is in mobile-multimedia — it develops its own mobile phones such as the i-mobile 8500.
We do not see any significant impact to earnings from the divestment. The cash consideration of RM108.4 million will only contribute 3.8% to the expected FY2010 earnings. We, however, welcome Axiata’s move to divest its Samart stake as it is a non-core investment and will allow Axiata to focus on its core business, especially in the high-growth market of Indonesia and Bangladesh. Interestingly, it is holding on to Samart i-Mobile. It is possible that it may have future plans of entering Thailand’s telecommunications market.
With the good performance expected in FY2010 and the growth potential in Indonesia and Bangladesh, we maintain our “buy” recommendation for Axiata, with a target price of RM5.50 based on seven times enterprise value/earnings before interest, taxes, depreciation and amortisation, which is the average of its regional peers. — MIDF Research, Dec 24
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