Axiata - Dividend and capex guidance

Axiata told the media after its AGM yesterday that it would announce a dividend policy by 3Q10. The company guided FY10F capex of RM3.6b, which includes RM1b for Celcom in Malaysia, USD500m for Excelcomindo in Indonesia, USD100m for Dialog in Sri Lanka and USD100m for Robi in Bangladesh. Further, Axiata plans to issue RM4.2b in Islamic debt by next month to refinance its existing loans. As the Islamic debt replaces existing facilities, there would
be negligible impact on our forecasts.

We had already factored in a slightly more conservative capex of RM3.7b for FY10F, which we see no need to update at this moment as the impact on earnings and valuation of Axiata is minimal. Since Axiata is announcing a dividend policy in 3Q10, which need not necessarily mean a payout, we had omitted a dividend payout for FY10F, but have assumed dividend payouts to start in FY11F. We have imputed a token amount of 10% only vs. a previous target of 30%,
which we intend to review once the official policy is announced.

We are keeping our forecasts, sum-of-parts price target of RM4.50 and BUY recommendation on Axiata. Further cost reduction in both operating and network costs are catalyst for future re-rating of Axiata.

Published by HWANGDBS Vickers Research Sdn Bhd (128540 U)