PETALING JAYA: Balance sheet optimisation will be a key rerating catalyst for Axiata Group Bhd, according to analysts.
CGS International (CGSI) Research viewed asset monetisation of its infrastructure assets, specifically of edotco and Link Net, as the primary catalyst for re-rating of the telecommunications company (telco) stock, which now trades at a 37% discount to its revalued net asset value (RNAV) estimate of RM3.19 a share.
Axiata’s management had indicated in the past that both transactions would be completed this year.
The research house thus maintained its “add” call on Axiata but lowered its RNAV-derived target price (TP) to RM2.87 a share (from RM3.22), largely due to a reduced valuation for edotco following the telco’s latest first-quarter results (1Q26).
UOB Kay Hian (UOBKH) Research estimates edotco to be priced at a blended seven to 10-times enterprise value over earnings before interest, tax, depreciation and amortisation (EV/Ebitda) valuation for a trade sale.
“This suggests that Malaysia’s tower sales will be valued at a premium to its frontier market assets.
“At 10-times EV/Ebitda, the transaction is expected to be earnings-accretive,” it noted in a report on the telco group.
In addition, UOBKH Research forecast the recent volatility in the Indonesian capital markets may result in the deferment of LinkNet’s near-term divestment plan.
It, nevertheless, maintained a “buy” rating on the stock with a sum-of-parts-based TP of RM3 a share.
Axiata’s 1Q26 financial performance showed a significant recovery in net profit despite a slight dip in revenue caused by a stronger ringgit.
Axiata’s 1Q26 normalised earnings improved by 174.2% year-on-year (y-o-y) to RM438.3mil despite revenue easing by 3.2% y-o-y to RM2.8bil.
The improvement in earnings was largely fuelled by operational synergies from mergers and strict expenditure controls, particularly within its international subsidiaries like those in Sri Lanka and Bangladesh.
MBSB Research maintained its “neutral” recommendation on Axiata with a revised TP of RM2.07 a share (from RM2.21) after factoring in Axiata’s exclusion from the MSCI and slower-than-expected merger and acquisition activities.
The research house also noted that while Axiata’s earnings improved in 1Q26 due to cost management, it expressed concern regarding the performance of XLSmart and Link Net.
CGSI Research noted the key risks for Axiata shares would be failure to monetise its assets and return value to shareholders; geopolitical risks in its key operating markets negatively impacting operations and profitability; and a shift in the regulatory environment in its key operating markets.