Shares of Axiata Group, the Malaysian telecommunications conglomerate, saw a decline on Wednesday due to concerns over its future performance following another quarterly loss. The company’s shares were down 6.2% at 2.42 ringgit, resulting in year-to-date losses exceeding 21%.
Axiata announced on Tuesday that its net loss for the second quarter had widened to MYR576.2 million ($124 million), compared to a net loss of MYR106.4 million in the same period last year. The increase in losses was mainly attributed to higher finance costs, increased depreciation and amortization, impairment of assets for mobile operations in Nepal, and write-off of receivables related to capital gains tax. However, quarterly revenue showed a positive growth of 15% compared to the previous year.
Analysts from AmInvestment Bank have lowered Axiata’s target price to MYR3.04 from MYR3.10 but maintained a hold rating due to cautiousness surrounding the company’s prospects amid macroeconomic headwinds that may adversely impact its frontier markets.
Considering Axiata’s exposure to a rising-rate environment and a highly leveraged estimated 2023 ratio of net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) of 1.9X, analysts from AmInvestment Bank stressed the vulnerability of the company’s financial performance.
Similarly, Hong Leong Investment Bank has reduced Axiata’s target price to MYR2.64 from MYR2.83 while also maintaining a hold rating, citing persistent macro challenges.
Analysts have noted that although Axiata’s planned merger with CelcomDigi could have long-term benefits, there are significant regulatory risks, particularly in Nepal, as well as economic risks in Sri Lanka that may impact the company’s outlook.