KUALA LUMPUR: Axiata Group Bhd is expected to deliver stronger third quarter (3Q) 2023 earnings before interest, taxes, depreciation, and amortization (ebitda), supported by higher revenue and stronger regional currencies.
RHB Research said a meaningful re-rating could come from better clarity on Axiata's asset delayering and monetisation exercise and earnings tailwinds in the financial year 2024 (FY24).
"Axiata is slated to announce 3Q 2023 results on Nov 29, followed by an earnings call. "We expect sequentially stronger core ebitda, supported by Dialog's cost-rescaling efforts, higher tenancies at edotCo, XL Axiata's data re-pricing, and stronger regional currencies," it said in a note.
RHB Research forecasts an ebitda of RM11.03 billion for Axiata, for the financial year ending December 31, 2023.
Meanwhile, RHB Research said the street's FY23/FY24 core earnings forecasts have been slashed by 40-60 per cent since the start of the year, with Axiata posting two successive quarters of earnings disappointments.
It also said the deconsolidation of Celcom in Dec 2022 has compounded the earnings slack with higher depreciation and financing costs from asset purchases crimping the bottomline.
"Nonetheless, with expectations at the low ebb, the inexpensive valuation (4.7 times financial year 2024 enterprise value (EV)/ebitda) at 2 standard deviation (SD) below the historical five year mean, and decent four per cent dividend yield, the stock's risk-reward is tilted on the upside," the firm said.
RHB Research has upgraded the stock to Buy from Neutral with a new target price of RM3.35 from RM2.78.
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