PETALING JAYA: Axiata Group Bhd
is confident of meeting its projections of reporting mid-single-digit revenue growth and high-single-digit earnings expansion for the financial year ending Dec 31, 2023 (FY23).
Chief executive officer and managing director Vivek Sood said the group is on track to achieve the targets, while anticipating a slight reduction in capital expenditure (capex).
Capex projections for FY23 will range between RM6.5bil and RM6.8bil, down from the initial forecast of RM7.1bil.
Vivek attributed the lower projection to the group’s caution with regards to certain markets grappling with unfavourable macroeconomic conditions.
Despite this, he emphasised that Axiata’s primary focus remains on monetising its existing assets.
He also underscored the group’s intention to pursue businesses that drive capex, with a clear monetisation plan linked to contracts.
“But for some of the other businesses where macro situations are not very conducive, we are cautious,” he said at a briefing yesterday on the groups performance for the first half of 2023 (1H23).
Regarding operational risks, Vivek said the strengthening of the US dollar and the prevailing environment of elevated interest rates pose challenges, particularly given the substantial borrowings denominated in US dollars.
He also acknowledged the double-edged nature of 5G development in Malaysia, presenting both risks and opportunities.
The risk stems from the need for capital in the short to medium term to participate in 5G initiatives.
“However, I think from a long-term perspective, this would be beneficial,” he said.
Addressing the state of the group’s balance sheet, Vivek recognised it has been stretched, constraining the potential for future strategic investments.
Axiata’s net debt-to-earnings before interest, depreciation and amortisation (Ebitda) ratio improved to 3.06 times from 3.23 times in the previous quarter due to Ebitda uplift.
To counteract this, Vivek outlined intentions to deleverage the balance sheet, highlighting a shift towards a more conservative approach that emphasises reinvestment through organic cash flow and explores external investor participation in specific businesses.
On the upcoming Boost-RHB digital bank, Vivek said it is set to be launched by year-end.
“We are fully committed to putting the IT platforms in place. I think the discussions with the central bank where they go through all the policies, look into the operating readiness of the company as well as ensuring proper governance processes are in place. Those things take time,” he said.
Elaborating on the digital bank’s key context, Vivek said its primary purpose would be lending, particularly to micro, small and medium enterprises for their working capital and supply.
He said the group already has a loan book of RM150mil, which will be integrated into the bank’s operations from day one, contributing to revenue and margins in the credit business.
For the second quarter ended June 30, 2023 (2Q23), Axiata’s net loss widened to RM576.21mil from RM106.38mil a year ago and consequently, loss per share expanded to 6.3 sen, from 1.2 sen in 2Q22.
The group, however, reported improved revenue of RM5.99bil in 2Q23, up from RM5.2bil in the comparative quarter.
Cumulatively, Axiata incurred a net loss of RM502.36mil in 1H23 on revenue of RM11.37bil, underpinned by growth in revenue ex-device from all operating companies except ADA and Ncell.
This compares to a net loss of RM149.35mil and revenue of RM10.18bil in 1H22.
Despite reporting losses, the group has declared a first interim dividend of five sen a share, as part of its commitment to shareholders to reach a 10 sen per share dividend target in 2023.
The group’s increased loss was attributed to several factors, primarily stemming from the reduced share of profits from Celcom Axiata Bhd, which is no longer its wholly-owned subsidiary after a merger with Digi.Com Bhd, forming CelcomDigi Bhd.
Axiata also had to contend with the negative outcome of Ncell’s legal case against the government of Nepal, which resulted in a non-cash asset impairment of RM393mil and capital gains tax write-off of RM317mil.
However, Vivek said these effects were offset by a RM402mil gain resulting from the conclusive closing adjustments associated with the Celcom-Digi merger.
