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Prepaid challenge slowing down Axiata’s recovery


KUALA LUMPUR 14 July - Maybank Investment Bank Research (Maybank IB) lowers the international telecommunication that also owns Celcom, Axiata Group’s performance forecast this year. 

Maybank IB estimates Axiata's revenue will decrease by another 2% for financial year 2020 to RM24,011 million compared to last year’s RM24,583 million as they incorporate a more conservative set of operating assumptions.

This directly impacted its net profit forecast with a higher cut of 19%. 

The lowered performance forecast steered by Axiata’s prepaid-centric product.

“With the exception of Celcom, Axiata’s international telcos are primarily prepaid-centric. With prepaid subscribers typically favoring physical transactions, these entities are thus vulnerable in the event of a major lockdown since stores and channels are closed.

“Nepal, Bangladesh, Sri Lanka and Malaysia all imposed major lockdowns in second quater 2020. In addition, the resulting economic challenges arising from the lockdowns could impact the spending power of subscribers, thus affecting the pace of revenue recovery,” said Maybank IB in a note. 

Meanwhile, the various lockdowns would have theoretically resulted in an increase in Axiata’s data consumption. 

However, Celcom, XL and Dialog had offered some form of complimentary data quotas as corporate social responsibility (CSR) initiatives during the lockdowns. 

“These entities would have thus not been able to fully benefit from the higher data volume,” said Maybank IB. 

With share price having corrected by 12% since the first quarter 2020 results release, Maybank IB sees the near-term headwinds have been partly priced-in for now.

“Our target price of Axiata is thus lowered to RM3.60 from RM4.00,” Maybank IB added. -