Earnings uptrend forecast for Axiata

PETALING JAYA: Axiata Group Bhd is expected to see stronger earnings, supported by improved performances at its key operating subsidiaries, particularly Dialog Axiata Plc in Sri Lanka and Robi Axiata Plc in Bangladesh.

CGS International (CGSI) Research has raised its earnings before interest and tax (Ebit) forecasts for the telecommunications group for financial year 2026 (FY26), FY27 and FY28 by 21.9%, 2.6% and 2.1%, respectively.

This is following stronger performances by the group’s subsidiaries in the first half of 2026 (1H26).

“Key upgrades come from Dialog Axiata and Robi Axiata, whose profits rose 78% and 17% year-on-year, respectively, in ringgit terms in 1H26,” it noted.

However, CGSI Research said the stronger ringgit against the currencies of Axiata’s overseas subsidiaries had partly offset these improvements.

The research house raised its core net profit forecast for Axiata’s FY26 by 13.3% and FY28 by 0.1%, but lowered its FY27 forecast by 5.2%, after factoring in lower earnings contributions from associate CelcomDigi Bhd.

The research house noted Axiata’s share price has fallen 27.4% since MSCI announced its removal from the MSCI Malaysia Index on May 12, compared with an 8.5% decline in the FBM KLCI over the same period.

CGSI Research attributed the underperformance to the index removal and lower valuation expectations for Axiata’s telecommunications tower subsidiary, Edotco.

It noted foreign ownership of Axiata shares declined to 6.8% at end-September 2026 from 10.3% at end-April, based on the group’s disclosures.

The research house said the sell-down had widened Axiata’s discount to its revised net asset value (RNAV) to 45%, despite the improved earnings outlook.

CGSI Research lowered the telecommunications company’s RNAV estimate to RM2.97 from RM3.19, reflecting updated valuations for CelcomDigi and Axiata’s operating subsidiaries, as well as currency adjustments.

It also reduced the value assigned to PT Link Net Tbk to zero, citing recent macroeconomic challenges in Indonesia that could weigh on the subsidiary’s valuation.

Overall, the research house maintained its “add” recommendation on Axiata, although it lowered its target price to RM2.67 a share from RM2.87 previously.

“We see valuations at 13.6 times FY27 forecast price-to-earnings and a 6.7% FY26 forecast dividend yield as attractive,” it said.

Looking ahead, CGSI Research said the potential monetisation of Edotco remains a key catalyst for narrowing Axiata’s valuation discount.

The brokerage noted that Axiata’s management had indicated in August that various monetisation options were being explored to unlock value from the tower business.