Axiata Group - A better 2015 priced in
With rebounds at Celcom and XL, we see stronger earnings for Axiata in FY15 but consensus numbers appear to have factored this in. On the negative side, we believe Axiata is likely to keep its capex high in FY15 to improve its data network quality, which could surprise the market. We cut our FY14-16 core net profit forecasts by 1.8-11.0% for lower estimates for Celcom and XL. Despite this, our SOP-based target price stays at RM7.20 as we now factor in higher valuations for Idea, Robi and Smart. We maintain our Hold call. The key upside risk is stronger-than-expected earnings at Celcom and XL while the key downside risk is sustained high capex in the medium term. We prefer DiGi, our top Malaysian telco pick.
Malaysia Airports Holdings - Conference call highlights
Surprisingly, MAHB said that it was reconsidering its long-held objective of defending its AAA credit rating status, which suggests that it was possibly open to a wholly/majority debt-funded acquisition of another 40% of Istanbul Sabiha Gokcen (ISG). This is positive because it means that there will be less dilution from the issue of new ordinary shares, and the overall WACC can be lower. We maintain Hold rating and our DCF-based target price. Downside risk to the share price is limited, but weak traffic growth and KLIA2-related costs are likely to lead to uninspiring results in the coming quarters.
Economic Update - Aug leading index edges up
The leading index edged up 1.7% yoy in Aug (+1.6% yoy in Jul). The composite indicators painted a positive but more moderate outlook. Jul-Aug’s moderation of export and IP growth suggests that real GDP growth should ease to around 5.2% in 3Q14 (vs. 6.4% in 2Q). We still anticipate full-year growth of 6.0% for this year and 5.0% for 2015, mainly supported by the government’s recent measures to support domestic demand and a moderate but positive export performance.
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