Axiata’s Myanmar exit will bolster investor confidence, say analysts

KUALA LUMPUR: The sale of Edotco’s Myanmar tower assets could see the removal of a stumbling block for Axiata Group Bhd by alleviating concerns over the group’s investments in frontier markets, say analysts.

Having previously announced its intent to dispose of its Myanmar investments, Axiata said in a stock market filing yesterday 63%-owned Edotco Group Sdn Bhd is proposing to dispose of its 87.5% stake in Edotco Myanmar for US$150mil (RM713mil) cash.

With Edotco actively courting strategic investors to raise capital for its expansion plans, especially in the Philippines, analysts believe the disposal of the unit in junta-ruled Myanmar will only facilitate its plans.

According to reports, the purchaser in the deal is Pun Tower Investments Ltd, which is wholly-owned by Yoma Group founder Serge Pun.

Kenanga Research, in its update, said it expects the securing of regulatory approvals from the Myanmar government to be smooth given the disposal to a local buyer. “This would enable Edotco to reach its targeted departure from Myanmar by 2024,” it said.

Meanwhile, the sale would also facilitate Axiata’s plan to pare down its debt, via the proceeds, it added.

The price of the sale, however, comes at a steep discount of 1.2x FY23 EV/Ebitda when compared with telco infrastructure group OCK Group Bhd at 6.1x and that of its Indonesian peers, at 10x.

Kenanga said the discount was partly justified due to the significant political risks in Myanmar. “In spite of the slight loss in Edotco Myanmar’s contribution and tepid sale valuation, we are positive on this disposal,” it said.

The research firm expects Axiata’s FY24 net debt/Ebitda to reduce slightly to 2.19x from 2.21x.

It is also expected to unlock Edotco Myanmar’s estimated cash holdings of RM390mil.

“Recall that Axiata alluded that it was challenging to secure approval from the Myanmar government to repatriate funds, particularly if the amount is significant,” said Kenanga.

The research firm lowered its FY25-26 earnings projections by 2% to reflect the removal of Edotco Myanmar’s contribution.

Correspondingly, its sum-of-parts target price was reduced by 2% to RM3.05 from RM3.10 previously, maintaining the research firm’s “outperform” recommendation.

In other reports, TA Securities Research, which maintained its “sell” call on Axiata, kept its earnings projections pending regulators’ approval for the proposed disposal. Its target price remains at RM2.35.

RHB Research maintained its target price of RM3.40 and “buy” call on Axiata, while also viewing the disposal positively ahead of an impending recapitalisation of Edotco.