Broker Name: Maybank Investment Bank Berhad
Date of Report: July 11, 2025
Axiata Group: Gearing Up for Growth with Strategic Balance Sheet Repair and Monetization Moves
Executive Summary: Axiata’s Balance Sheet Transformation and Investment Outlook
Axiata Group is taking decisive steps to address its gearing concerns and unlock shareholder value, positioning itself for net profit recovery and potential re-rating catalysts. Strategic divestments, particularly in its tower arm edotco, are central to its balance sheet repair strategy. With a strong focus on monetizing assets and maintaining robust dividends, Axiata remains a compelling pick in the telecommunications sector.
- Current Price: MYR 2.35
- 12-Month Target Price: MYR 2.90 (+26%)
- Recommendation: BUY
- Market Capitalization: MYR 21.6 billion (approx. USD 5.1 billion)
- Shariah Compliant
Overview: Axiata Group’s Business and Market Presence
Axiata Group owns a diverse portfolio of mobile telcos, network infrastructure, and digital internet companies across 10 Asian countries. Major shareholders include Khazanah Nasional Bhd. (36.4%), Employees Provident Fund (17.8%), and Permodalan Nasional Bhd. (16.8%). With over 9.1 billion shares issued, Axiata is a significant player in Asia’s telecommunications landscape.
Addressing Gearing: The Edotco Factor
One of Axiata’s most pressing challenges has been its elevated balance sheet leverage, driven in large part by its 63% stake in tower company edotco. As of 1Q25, Axiata’s net debt to EBITDA ratio stood at approximately 3.0x, while edotco’s standalone ratio was an even higher 3.9x. Despite recent major transactions such as the XL-Smartfren merger and the Myanmar towers divestment, a material reduction in gearing is expected only through further monetization of edotco.
Simulation of Edotco Divestment: Impact on Gearing
Maybank’s analysis models the full divestment of Axiata’s edotco stake at a 7-12x EV/EBITDA multiple, yielding potential proceeds of MYR 3.2 billion to MYR 8.3 billion. This move would:
- Deconsolidate edotco’s borrowings
- Reduce Axiata’s net debt to EBITDA from 3.0x to as low as 0–1.6x, depending on transaction value
- Provide liquidity for Axiata to pare down holding company debt, potentially accreting earnings
Scenario Analysis Table: Hypothetical Edotco Disposal
| EV/EBITDA |
Enterprise Value (MYR m) |
Axiata’s 63% Stake (MYR m) |
Deconsolidated Net Debt (MYR m) |
Net Debt/EBITDA (x) |
| 7.0 |
11,368 |
3,166 |
-8,306 |
2.6 |
| 8.0 |
12,992 |
4,189 |
-5,140 |
1.6 |
| 9.0 |
14,616 |
5,212 |
-4,117 |
1.3 |
| 10.0 |
16,240 |
6,235 |
-3,094 |
1.0 |
| 11.0 |
17,864 |
7,258 |
-2,071 |
0.6 |
| 12.0 |
19,488 |
8,281 |
-1,047 |
0.3 |
Financial Performance and Forecasts
Axiata’s forecasted financials reflect the deconsolidation of XL post-merger and ongoing asset monetization strategies. The company continues to commit to a minimum annual dividend payout of 10 sen per share.
Key Financial Highlights (MYR million unless stated):
| Year |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Revenue |
23,489 |
22,335 |
16,159 |
12,640 |
13,104 |
| EBITDA |
10,560 |
11,129 |
7,593 |
5,823 |
6,002 |
| Core Net Profit |
542 |
694 |
586 |
811 |
1,079 |
| Core EPS (sen) |
5.9 |
7.6 |
6.4 |
8.8 |
11.8 |
| Net DPS (sen) |
10.0 |
10.0 |
10.0 |
10.0 |
10.0 |
| Net Gearing (%) |
114.5 |
106.5 |
54.7 |
53.5 |
52.4 |
| Core P/E (x) |
40.3 |
32.9 |
36.8 |
26.6 |
20.0 |
| Net Dividend Yield (%) |
4.2 |
4.0 |
4.3 |
4.3 |
4.3 |
Sum-of-Parts Valuation: Country-by-Country Analysis
Axiata’s target price of MYR 2.90 is derived from a sum-of-parts (SOP) approach using discounted cash flow (DCF) for each operating company:
| Country/Business |
Value (MYR m) |
Stake |
Attributed Value (MYR m) |
Per Share (MYR) |
% SOP |
| Malaysia |
44,566 |
33% |
14,752 |
1.61 |
55% |
| Indonesia |
16,278 |
37% |
6,007 |
0.65 |
23% |
| Bangladesh |
6,598 |
62% |
4,077 |
0.44 |
15% |
| Sri Lanka |
2,348 |
83% |
1,957 |
0.21 |
7% |
| Cambodia |
7,612 |
73% |
5,519 |
0.60 |
21% |
| Linknet |
-4,872 |
87% |
-4,233 |
-0.46 |
-16% |
| Edotco |
5,166 |
63% |
3,254 |
0.35 |
12% |
| Digital Businesses |
1,898 |
– |
– |
0.21 |
7% |
| Residual Net Cash |
-6,648 |
– |
– |
-0.72 |
-25% |
| Total Equity Value |
|
26,583 |
2.90 |
100% |
Operating Performance by Geography and Segment
Axiata’s business is diversified across several countries. Here’s the split for revenue, EBITDA, and net profit for 2024 and 2025E:
| Region/Segment |
2024 Revenue (MYR m) |
% |
2025E Revenue (MYR m) |
% |
2024 EBITDA (MYR m) |
% |
2025E EBITDA (MYR m) |
% |
2024 Net Profit (MYR m) |
% |
2025E Net Profit (MYR m) |
% |
| Indonesia |
9,939 |
45 |
3,963 |
25 |
5,205 |
47 |
1,942 |
26 |
278 |
40 |
45 |
8 |
| Bangladesh |
3,956 |
18 |
3,775 |
23 |
1,979 |
18 |
1,812 |
24 |
184 |
26 |
97 |
17 |
| Sri Lanka |
2,658 |
12 |
2,808 |
17 |
1,034 |
9 |
1,067 |
14 |
101 |
15 |
133 |
23 |
| Cambodia |
1,882 |
8 |
1,888 |
12 |
1,083 |
10 |
1,067 |
14 |
396 |
57 |
403 |
69 |
| Linknet |
1,057 |
5 |
1,057 |
7 |
393 |
4 |
264 |
3 |
-182 |
-26 |
-293 |
-50 |
| edotco |
2,857 |
13 |
2,667 |
17 |
2,066 |
19 |
1,840 |
24 |
91 |
13 |
151 |
26 |
| CelcomDigi |
– |
– |
– |
– |
– |
– |
– |
– |
456 |
66 |
585 |
100 |
| Others |
-15 |
0 |
0 |
0 |
-630 |
-6 |
-400 |
-5 |
-629 |
-91 |
-536 |
-91 |
| Total |
22,335 |
|
16,159 |
|
11,129 |
|
7,593 |
|
694 |
|
586 |
|
ESG: Sustainability, Governance, and Social Initiatives
Axiata scores above average on ESG with a 61/100, reflecting its established sustainability framework, operational policies, and mid/long-term targets.
- Environment: Low emissions intensity, with ongoing investments in energy efficiency and renewable energy. The company aims for net zero carbon emissions by 2050.
- Social: Focus on digital inclusion, rural connectivity, and gender diversity. Women comprise 31% of the workforce and 27% of the board (targeting 30% by 2025).
- Governance: Strong board independence (55%), ongoing efforts for greater female representation, and a history of audited financials by PwC. CEO remuneration is 1.1% of normalized net profit.
Key Quantitative ESG Metrics (2023):
- Scope 1 emissions: 28.8 ktCO2e
- Scope 2 emissions: 1,094.6 ktCO2e
- Carbon intensity per data usage: 0.07 tCO2e/TB
- Solar adoption at sites (edotco): 2,604
- Women in management: 24%
- Average employee training hours: 22.1
Risks and Considerations
Investors should be aware of several key risks:
- Competitive risk: Price wars may reduce profitability.
- Regulatory risk: Changes in spectrum fees, taxation, or product pricing.
- Currency risk: Exposure to multiple emerging and frontier markets.
- Execution risk: Monetization and M&A strategies must deliver anticipated benefits.
Conclusion: Investment Case and Outlook
Axiata’s commitment to balance sheet repair, asset monetization, and stable dividends make it an attractive telecommunications play in Asia. The hypothetical divestment of its edotco stake could sharply reduce gearing and unlock value, potentially catalyzing a re-rating. With a diversified footprint, strong ESG credentials, and a clear focus on shareholder returns, Axiata is well-positioned for recovery and sustainable growth.
Recommendation: BUY
Target Price: MYR 2.90
Upside: 26% from current levels
Contact
For further insights, contact Tan Chi Wei, CFA, Maybank Investment Bank Berhad.
