Axiata sees encouraging start to the year in its Q121 results

  • Axiata Digital’s YoY revenue, EBITDA, PATAMI grew 30.5%, 72.6% & 72.3%
  • Celcom added over 1mil subscribers over past 12 months, EBIDTA up 27.6%

 

Axiata sees encouraging start to the year in its Q121 results

Axiata Group Bhd (Axiata) kickstarted the year on solid footing for the first quarter ended 31 March 2021 (Q121) guided by the Axiata 5.0 vision aimed at transforming the Group into paying higher dividends by 2024.

Emerging from a challenging 2020 which bore the brunt of pandemic related challenges, revenue in Q121 held steady at US$1.47 billion (RM6.1 billion), growing 0.5% year-on-year (YoY) given the resilient performance from most of its operating companies (OpCos), except PT XL Axiata and Ncell Axiata Ltd which faced intense competitive pressures in their respective markets.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) growth (+7.5%) outpaced revenue growth at (+0.5%) mainly driven by Celcom Axiata Bhd and Axiata Digital Services Sdn Bhd, offset by forex translation impact due to Ringgit strengthening against OpCo currencies. Profit After Tax and Minority Interests (PATAMI), recorded at US$18.3 million (RM76 million) for the quarter, was affected by lower one-off gains and accelerated depreciation of Celcom and Robi Axiata Ltd.

The Group’s robust fundamentals strengthened by its focus on operational excellence to drive cash generation and profitability led to robust underlying performance.

EBITDA growth YoY (+10.6%), outpaced revenue excluding device (ex-device) growth (+2.0%), with EBITDA margin at 44.4% (+2.9 ppt). Despite the RM126 million accelerated depreciation impact in Q121, PATAMI (underlying performance – at constant currency) surged 85.0% YoY, on the back of higher EBITDA contribution from all OpCos except XL and Ncell. (Growth numbers for OpCos are based on results in local currency in respective operating markets.)  

Having successfully lowered gross debt/ EBITDA ratio to 2.5x and maintaining a cash balance of RM6.6 billion, the Group maintained a healthy balance sheet in Q121. Against an uncertain economic environment, its capital structure was well-managed with a good balance of 41% of loans held in local currency, 68% on a fixed interest rate and 25% on short-term maturity.

“Having started the year on a strong footing despite the prevailing macro conditions, the Board is heartened to note the steady performance delivered across the Group since the start of the pandemic in March last year,” said Ghazzali Sheikh Abdul Khalid, Chairman of Axiata.

“We are cognisant of the increasing risks and unpredictable scenarios that lie ahead for the industry and our businesses. The region continues to grapple with multi-faceted challenges as each country battles to mitigate blows from the protracted Covid-19 crisis. Despite this, we press on towards the realisation of our ambition to become The Next Generation Digital Champion by 2024,” he adds.  

Ghazzali also emphasised that the proposed Celcom-Digi merger making good headway. “We are resolute in our intention to secure positive outcomes for our customers and stakeholders.”

In his comments, Izzaddin Idris, President & Group Chief Executive Officer of Axiata noted the encouraging start to the year as testimony the company has the right strategy in place to support its immediate to mid-term goals. “I am particularly assured to see our operating companies rise up to the challenges of intense market pressures, to exhibit resilience in their capacity to stay competitive and operationally efficient.”

He also adds, “Whilst the results for the first quarter are encouraging, we remain circumspect in our outlook for the second quarter and beyond, especially given the resurgence of movement restrictions and its strain on economic recovery.”

Other areas management continues to monitor, he says, include challenges from the 3G shutdown in Malaysia and heightened competition subsequent to new spectrum allocation in Indonesia.

Despite the current limited impact to edotco, Axiata is keeping a very close watch on the socio-political developments in Myanmar and will continue to assess any business, operational, and financial risks.

Among upsides, Izzaddin says, “we look forward to the improved Ncell network from the 900MHz spectrum award and market share gain for XL despite the continuing intense competition. The recent RM250 million capital boost from SoftBank Corp into ADA provides strong growth impetus for the data analytics & AI businesses, now valued at RM1.1 billion.”

Barring unforeseen circumstances, 2021 revenue (ex-device) and EBITDA growth are projected to be in line with the company's headline KPIs of low single digit percentage growth.

 

Digital Businesses

Encouraged by improvements in revenue as well as operational expenditure savings, Axiata Digital Capital Sdn Bhd’s (Axiata Digital) YoY revenue grew (+30.5%), with both EBITDA and PATAMI increasing by 72.6% and 72.3%. For 2021, Axiata Digital plans to pursue a digital banking license in Malaysia, which will centre on bundling the various services that Boost and Aspirasi currently offer into a unique digital bank proposition.

For the micro-financing business, as at 31 March 2021, Aspirasi funded 1,970 merchants, having disbursed 13,721 loans amounting to RM134.4 million. Under micro-insurance, it sold a total of 45,691 policies, recording 64.4x growth YoY. The company made the move to prioritise fully digital micro-financing and micro-insurance solutions for the underserved community in Malaysia. Correspondingly, in March 2021, Aspirasi introduced its first consumer financing product, Aspirasi CashNow, with Lazada Malaysia for their customers. Consumers who choose to apply for Aspirasi CashNow will receive funds credited in their Lazada Wallet, along with a convenient and affordable monthly instalment plan.

Boost’s Gross Transaction Value (GTV) expanded in Q121 (1.1x). Total users grew 1.2x to 8.9 million while total merchants increased 1.5x to 236,229 YoY. Active user spending increased by nearly 20% to an average of RM389 per week compared to RM326 per week a year ago. Boost has joined the DuitNow QR ecosystem to support the recovery of the Malaysian economy in a safer and contactless way, whilst also entering into significant new partnerships with Lazada and McDonald’s, among others.

Axiata Digital Advertising Sdn Bhd, which operates under the brand ADA secured new clients under the ‘Digital Analytics and Consulting’ banner such as Petronas (Malaysia), OPPO and The Learning Lab (Singapore), Lazada (Indonesia), Cigna Insurance (Thailand) and AEON (Cambodia).

New clients for its ‘Digital Media and Creative’ segment included brands such as, Nestle (Bangladesh), Tourism Authority Thailand (Thailand), International Labour Organisation (Cambodia) and San Miguel brands 'Star' and 'Veega' (Philippines). ADA’s Marketing Technology solutions continue to secure large clients, and the announcement of the ADA and Insider strategic partnership has further solidified its position in helping enterprises drive data-led growth in marketing initiatives.

 

Telcos

Celcom’s performance in Q121 continued to demonstrate improvements in subscriber, revenue and operational profitability measures, despite challenges in a highly competitive market. EBITDA improved YoY (+27.6%) mainly due to the absence of one-off items incurred in Q120.

Adjusting for performance comparison, EBITDA grew (+6.6%) primarily due to improvements in credit management and staff costs. Total prepaid subscriber base grew by 893,000, total revenue (ex-device) remaining resilient in a declining market, with higher prepaid revenue being offset by significant decline in roaming related revenues. PATAMI dropped (-22.9%) from accelerated asset depreciation arising from the planned 3G shutdown. However, excluding these items, PATAMI rose (+13.2%) on the back of lower net finance cost.

Intense competitive pressures and weak consumer spending triggered by the pandemic led to XL’s revenue (ex-device) slipping by 3.8% YoY. EBITDA margin, however, held at a strong 49.9% from lower operating costs. PATAMI dropped (-78.9%) compared to Q120 which saw a one-off gain from the sale and leaseback of telecommunication towers. As its 4G coverage reached 458 cities across various regions in Indonesia, XL Axiata continued to roll out network fiberisation to increase network capacity in anticipation for the 5G deployment.

Posting double-digit YoY growth across all metrics, Dialog Axiata Plc’s (Dialog) revenue (ex-device), EBITDA, PATAMI and FCF increased by 12.5%,12.3%, 64.4% and 10.0% respectively on the back of higher contribution from all segments, coupled with consolidation of H One, a cloud solutions service provider acquired in January 2021.

Amidst stiff competition, Robi delivered 2.4% YoY growth in revenue (ex-device) for the quarter, aided by jump in data revenue growth (+16.3%). EBITDA grew (+3.1%), while EBITDA margin rose (+0.6ppt) to 41% as a result of lower marketing spend. PATAMI surged (+82.7%) despite the impact of accelerated depreciation stemming from the flow through of higher EBITDA, lower net finance cost, and taxation due to reduced tax rate applicable to listed companies following its IPO in December 2020.

Smart Axiata Company Ltd (Smart) maintained a steady pace for the quarter with revenue (ex-device) and EBITDA up 7.1% and 2.0% YoY, driven by data revenue. PATAMI declined (-31.1%) due to one-off impairment, excluding which the drop narrowed to 3.3%.

Spectrum constraints and stiff competition continued to weigh on Ncell’s YoY performance, as revenue (ex-device) declined 12.5%, dragged by lower core and international long distance. Whilst EBITDA slipped (-10.7%) during the quarter, EBITDA margin expanded (+1.2 ppt) to 59.5% from lower direct and staff costs. PATAMI declined (-9.5%) due to flow through from the decline in EBITDA, cushioned by lower depreciation and amortisation (D&A) cost.

 

Infrastructure

Edotco Group Sdn Bhd (edotco) sustained its solid EBITDA margin at 64.1% (+1.9 ppt) in Q121. YoY revenue and EBITDA grew 4.0% and 7.2% respectively driven by higher contributions across the footprint especially from its top two markets of Bangladesh and Malaysia. PATAMI increased (+42.2%) on the back of EBITDA improvement coupled with lower D&A cost and higher unrealised forex gain. There has been limited impact to PATAMI from the Myanmar coup thus far. Notwithstanding, edotco management is continuously monitoring the development of the situation in the country.

 
 
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