Axiata vs Maxis

Axiata catching up on Maxis on local bourse

Although Maxis Bhd’s second act on the local bourse raised the highest initial public offering at RM11.2 billion in 2009, this year sees the tide turning for Axiata Group Bhd, judging by the counter’s stellar performance to date.

If last year was marked by the excitement of Maxis’ comeback for the telco industry, this year could be defined by Axiata finally proving it is worth its salt since demerging from Telekom Malaysia Bhd and listing in April 2008. Axiata, it seems, is now the darling pick of investors and analysts alike, due to its compelling growth story and overseas exposure.

The counter hit a two-year high last Thursday of RM4.76. Year-to-date (YTD), it has risen some 55.41%.

Maxis, on the other hand, has been hovering not far from its IPO price of RM5.20. From its relisting on Nov 18 last year to last Friday, the counter saw a high of RM5.52 and a low of RM5. YTD, it has lost 1.12%.

Due to Axiata’s steady share-price rise, its market capitalisation of RM39.95 billion slightly surpassed that of Maxis at RM39.83 billion on Dec 3.

Last Friday, Axiata lost two sen to close at RM4.74, while Maxis lost six sen to close at RM5.31. However, Axiata still commanded the upper hand, with RM40.03 billion in market capitalisation to Maxis’ RM39.83 billion.

Part of the reason for Axiata’s rise is its growing overseas portfolio. Aside from Celcom in Malaysia, it has substantial stakes in Indonesia’s XL, Sri Lanka’s Dialog, Bangladesh’s Robi and associate stakes in Singapore’s M1 and India’s Idea Cellular.

For the nine months ended Sept 30, XL was the biggest contributor to Axiata’s earnings before interest, tax, depreciation and amortisation (Ebitda) at 46%, compared with Celcom’s 43%. XL’s contribution was a significant increase from the 36% recorded in the corresponding period last year, while Celcom’s contribution fell from 55% a year ago.

For the nine months under review, revenue grew 21% year-on-year (y-o-y) to RM11.6 billion, from RM9.6 billion, while Ebitda grew an impressive 41% y-o-y to RM5.3 billion, from RM3.8 billion.

Meanwhile, Maxis’ second appearance last year only saw the relisting of its Malaysian operations, and excluded its overseas operations. Part of the reason Maxis was delisted back in 2007 was the need to raise funds for its Indian venture Aircel Ltd. Thus, the counter clearly lacks the regional growth story that Axiata enjoys.

But in terms of mobile subscriber base, the status quo has been maintained over the years. Maxis is still the leader in the postpaid and prepaid space. For 3Q10 ended Sept 30, it led with 13.53 million total subscribers to Celcom’s 11.1 million. DiGi, operated by DiGi.Com Bhd, has 8.25 million subscribers.

However, in the mobile broadband space, Celcom took the lead with 803,000 subscribers as at Sept 30. Maxis came in second with 524,000 subscribers, while late entrant DiGi had 170,000.

In terms of recommendations, research houses seem to be bullish on Axiata. As at last Friday, it had 22 buy, four hold and two sell calls. Meanwhile, a majority of research houses, 20 specifically, have a hold call on Maxis.

An analyst said there was more to look forward to in Axiata, given the regional growth stories. “For 3Q, we’ve seen the Sri Lanka and Bangladesh units turn around in terms of profitability. On top of that, Indonesia is growing. The regional exposure is good for Axiata, especially because competition in Malaysia is quite tough. That exposure provides the hedge against other domestic competitors,” the analyst said.

In several recent notes, analysts stated that Axiata’s management was looking at around RM100 million to RM150 million in cost savings from its proposed network sharing with DiGi. Announced in July, the tie-up is undergoing a feasibility study and is expected to conclude early next year. This initiative is one of the largest networks in Malaysia, involving the sharing of infrastructure, which could reduce capital and operating expenditure.

Furthermore, Axiata had declared a dividend payout of 30% this year. According to a note from Maybank IB Research last month, this target was “easily achievable”.

“Management highlighted that Axiata’s balance sheet would still look ‘lazy’ with a 30% dividend payout. We have indicated in our previous report that a 30% payout is easily achievable, given Axiata’s strong cash-generation ability. We currently assume a 50% payout beginning 2011, which implies dividend yields in excess of 3.5% at current share price,” it said. - by Aishah Mustapha