KUALA LUMPUR: CIMB Equities Research is retaining its Hold call for Axiata Group after the sale of a stake in edotco to Innovation Network Corporation of Japan (INCJ) and Khazanah Nasional for US$600mil.The research house said on Thursday it was awaiting more information from Axiata on edotco’s net profit. Without this, it was unable to factor in potential earnings reduction due to minority interest post-deal.“We keep our sum-of-parts based target price of RM4.50 (after 10% discount) and Hold rating. The 4Q16 results will be released on Feb 23.“Upside risk is stronger-than-expected recovery at Celcom/XL; downside risks are more intense competition and 700MHz spectrum refarming in Malaysia,” it said.Axiata had on Wednesday announced it was issuing new edotco shares to INCJ for US$400mil (RM1.78bil) and sell existing edotco shares to Khazanah for US$200mil (RM899mil) cash. The transaction should close by end-January.“This will give INCJ/Khazanah a 22.7%/11.4% stake, while Axiata will hold the remaining 65.9% in edotco, based on its current portfolio comprising 100% in edotco Malaysia (3,717 towers), 87.5% in edotco Myanmar (1,250 towers) and 80% in edotco Bangladesh (7,993 towers),” it said.CIMB Research said that at a later date, Axiata will inject 80% of edotco Sri Lanka (2,144 towers) and 62% ofedotco Cambodia (1,950 towers) into edotco. This translates into proforma gross debt/EBITDA of 2.4 times, which is in line with Axiata's target to bring it below 2.5 times,” it said.CIMB Research noted that despite this being a pre-IPO placement, Axiata is fetching a good valuation for edotco.

Source: The Star January 19, 2017 00:51 UTC