3 Results That You Should Not Miss

During the short lunch break, 3 of KLCI member companies have released their quarterly earnings. Details as follow:

i) RHB 2Q14 EPS increased 33% to 21.90 sen. 1H14 cumulative EPS was up 28% to 39.50 sen. Its latest book value is RM6.97.

ii) AXIATA 2Q14 EPS fell 32% to 5.20 sen. 1H14 cumulative EPS was down 11% to 13.10 sen. Its latest book value is RM2.27. Dividend declared was 8.0 sen.

iii) TM 2Q14 EPS is flat at 5.97 sen. 1H14 cumulative EPS was down 1% to 11.86 sen. Its latest book value is RM2.03. Dividend declared was 9.5 sen.

AXIATA FY2010 Result Preview

Axiata will release its FY2010 result tomorrow with the consensus are estimating revenue of RM15526.44m (22.27% growth y-o-y) and net income of RM2626.07m (90.85% growth y-o-y).

My view:
i) Growth in the broadband segment should continue to be strong. In 3Q2010, broadband net adds improved to 96,000 (2Q10 : 72,000) bringing total to 803,000.
ii) Indonesia contribution at EBITDA level should continue to surpass Celcom. In 9MYTD2010, XL Indonesia already consists 46% of Axiata's EBITDA (vs. 43% from Celcom)
iii) FY2010 KPI should be easily beaten as 9MYTD revenue growth already at 21.4%, vs target of 12.1%. Meanwhile, 9MYTD EBITDA growth already at 40.7%, vs. 14.1% target.

But:
Market seems to have anticipated the good set of result with Axiata share price has increased after the release of XL Axiata result which is better than expected.
Average analyst target price = RM5.43, range from RM4.18 to RM6.40
KLCI sentiment seems to be negative as well, so the result really need to surpass expectation by more than 5% to see meaningful impact on share price.

3 Updates on AXIATA

As usual, keep it short and simple, 3 updates about AXIATA:

1. I have mentioned about AXIATA on 25-Nov-2010 when the price was at RM4.72. The stock has appreciated 20 sen to RM4.92 as of yesterday close. To recall, Axiata has announced its dividend policy of minimum 30% of its net income on 25-Aug-2010. Once the Company starts its payment in FY2011, AXIATA is poised to gain more recognition from investors.

2. Out of 28 analysts covering the stocks, 22 are calling BUY call and 4 Hold call and 2 SELL. Average Target Price is RM5.37, Lowest: RM4.03 and Highest: RM6.40.

3. However from technical view, AXIATA RSI is OVERBOUGHT at 71.29.

In short, fundamentally good stock but I will have to wait at slightly cheaper price to get better value.

Outlook for 27-Dec-2010

Last Friday, US market was closed for Christmast Eve. However, European market ended mixed with FTSE up 12.85p to 6008.92p while DAX lost 10.23p to 7057.69p.

Here are some of major news over the weekend:
i) China's PBOC's Christmas rate rise to weigh on commods at open Click for full report at Reuters
ii) World economy can withstand US$100 oil price: Kuwait Click for full report at Reuters

My view:
The surprise interest rate increase by 25bp is negative to the market, especially to commodity linked sectors such as Oil & Gas and Plantation. This is due to possible pressure to oil price and thus indirectly CPO price. However, the knee-jerk reaction should be temporary. With the low interest rate regime in US, the money flow should be gravitated towards commodity and equity for growth and inflation hedge. Overall, today should be slightly negative for KLCI as investors are likely to use the news from China as an excuse to take some profit off the table. This may represent opportunity for bargain hunting at the afternoon session.

Stocks that I STILL find attractive:

1. DRBHCOM (HwangDBS Target Price at RM3.55, still trading at huge discount compared to other conglomerates in Malaysia, got potential to go up to RM3.00)
2. AXIATA (Recently sold its stake in Samart, growth to come from Indonesia market, stable Malaysian Celcom recurring income, maiden dividend payout in 2011 should be a major rerating catalyst, average consensus Target Price RM5.28)
3. FPI (Trade at attractive historical PER of less than 6.0x, strong balance sheet with net cash of RM81.42m or 33.14 sen per share, got potential to go up to RM1.39)

Axiata sold 18.9% stake in Samart

This is the news gathered from Bernama website:




Axiata Group Bhd has completed the sale of its entire stake of 18.9 per cent in Samart Corporation Public Company Limited to existing shareholders Charoenrath Vilailuck and Watchai Vilailuck for US$34.8 million.


Axiata still holds its 24.4 per cent stake in Samart i-Mobile, focusing on mobile, multimedia and international business, the company said in a statement today.

"This divestment reinforces our commitment to focus on our primary business of mobile communications," Axiata President and Group Chief Executive Officer Datuk Seri Jamaludin Ibrahim said.....



My view:

1. The sale is in line with Axiata Group strategy to focus on mobile communications. To recall, Axiata has also sold its 89% stake in Multinet Pakistan (Pte) Ltd for US$15 million on 19 July 2010. I view this positively as more focused management should be able to operate more efficiently by leveraging the technical know how and telco expertise across different countries.

2. The cash proceeds of the US$34.8m is likely to be used as working capital or to support the dividend payment which will start in FY2011. To recall, Axiata has announced its dividend policy of minimum 30% of its net income on 25-Aug-2010. Once the Company starts its payment in FY2011, Axiata is poised to gain more recognition from investors. Assuming the Company choose to pay dividend quarterly (same as MAXIS and DIGI practice), then the 1st dividend will be paid around May-2011 when the 1Q2011 result is announced.

3. Lastly, to recap, the average Target Price for Axiata is RM5.28, representing 12.3% upside.

Today's outlook 21-Dec-2010

Overnight, US market ended flat with DJIA down 13.78p to 11478.13p while S&P gained 3.17p to 1247.08p.

Here are some of the news that may have affected US market:
i) American Express fell 3.4% as new rules by Fed Reserve could limit merchant fees of the Company.
ii) Increase in Amazon.com after analysts upgraded their estimates and ratings.
iii) Rebound in oil price provide support for energy stocks
My view:
Only the rebound of oil price news is something that I think could affect Malaysia market. Oil and gas counters are expected to continue to be in the limelight. From historical PER viewpoint, KNM seems to be the most attractive O&G stock. Also, I believe that North Korea is unlikely to attack South Korea. Overall, today should be slightly bullish for KLCI as investors are likely to return to search for better yields and growth in the equity market.
 
Stocks that I STILL find attractive:

1. CRESNDO (Pure proxy to Iskandar investment theme, paid 7 sen dividend in the past 5 Financial Years, undemanding Price/NTA of 0.47x only, got potential to go up to RM2.55)
2. AXIATA (Growth to come from Indonesia market, with stability in Malaysia Celcom, maiden dividend payout in 2011 should be a major rerating catalyst for this stock, average consensus Target Price RM5.28)
3. HSL (Proxy to Sarawak election theme play, strong balance sheet with net cash position, upside potential will be the announcement of any future projects won, average consensus Target Price RM2.17)