Axiata’s FY18 results dampened by dilution of India’s investment, write-off

KUALA LUMPUR, Feb 22 — Axiata Group Bhd swung to a net loss of RM5.03 billion in the 2018 financial year (FY18) from a net profit of RM909.48 million in the previous year due to dilution of its investment in India and asset write-off that ran into…

Axiata’s FY18 results clouded by accounting adjustments

PETALING JAYA: Axiata Group Bhd suffered a net loss of RM1.66 billion in the fourth quarter ended Dec 31, 2018 compared with a net profit of RM24.73 million a year ago due to one-off asset written-off/accelerated depreciation of obsolete assets and equipment decommissioned from network modernisation projects.

In a filing with Bursa Malaysia, the group said revenue for the quarter rose marginally to RM6.27 billion from RM6.26 billion a year ago. At constant currency of Q4 2017, revenue grew 5.6% attributed to operating companies in Malaysia, Sri Lanka and Cambodia.

In Malaysia, revenue grew 11.7% to RM1.92 billion underpinned by higher device revenue from one-off “100,000 free smartphone” special campaign for selected long-term loyal customers during the quarter.

Consequently, earnings before interest, taxation, depreciation and amortisation (Ebitda) fell 21.7% to RM466.2 million. The lower Ebitda combined with one-off assets written off/accelerated depreciation amounting to RM358.4 million resulted in a net loss of RM216.7 million compared with a net profit of RM264.5 million a year ago.

Excluding the one-off adjustment, the Malaysian operations recorded a net profit of RM141.7 million during the quarter.

In Sri Lanka, total revenue was stable at RM678.3 million. At constant currency of Q4 2017, revenue grew 15% on the back of strong data revenue underpinned by higher 3G data usage while Ebitda grew 10.2% to RM273.4 million.

At constant currency of Q4 2017, Ebitda grew 25.8% but higher depreciation and foreign exchange translation loss resulted in a net loss of RM900,000 compared with a net profit of RM86.3 million a year ago.

In Cambodia, revenue and Ebitda grew 16.3% and 15.8% respectively due to strong growth of data revenue despite the price war and adverse regulatory impact. At constant currency, revenue and Ebitda grew 15.9% and 15% respectively. Net profit stood at a record RM75.3 million.

For the financial year ended Dec 31, 2018 (FY18), the group reported a net loss of RM5.03 billion compared with a net profit of RM909.48 million a year ago while revenue fell 2.12% to RM23.89 billion from RM24.40 billion a year ago.

The group declared a tax exempt dividend under single tier system of 4.5 sen per share in respect of FY18. Full year dividend declared for FY18 is 9.5 sen.

The Dividend Reinvestment Scheme will apply to the dividend, whereby shareholders will have the option to elect to reinvest the whole or part of the dividend into new Axiata shares.

Axiata president and group CEO Tan Sri Jamaludin Ibrahim said its results at a glance can be alarming and misconstrued as it is almost all due to non-cash items that are purely accounting treatments as opposed to some fundamental performance but the underlying performance is very strong.

“To be specific, due to the massive accounting adjustments especially the reclassification of our Indian asset into the balance sheet, Idea performance will no longer drag our profitability. In fact, there are now more upsides given our belief in the long-term future of the merged company,” he said in a statement.

“Additionally, the 2G and other legacy network write-offs are expected to result in D&A savings of around RM150 million per year, hence, correspondingly improve our profitability,” he added.

He said the group is confident of a promising 2019 given the huge tail wind from the momentum from the operational successes across the group and the strong balance sheet from the M1 sale of RM1.65 billion as well as its RM5.1 billion cash balance.

Public Bank proposes 37 sen dividend for Q4

PETALING JAYA: Public Bank Bhd has proposed to declare a second interim dividend of 37 sen for the fourth quarter ended Dec 31, 2018 despite its net profit declining 5.4% to RM1.41 billion against RM1.49 billion in the previous corresponding period.

Revenue for the quarter, however, grew 5.3% to RM5.63 billion from RM5.35 billion.

Together with the first interim dividend of 32 sen per share, the bank’s full-year dividend for 2018 amounts to 69 sen or a total dividend payout of RM2.7 billion, representing 47.9% of its net profit for 2018.

Public Bank’s full-year net profit rose 2.2% to RM5.59 billion from RM5.47 billion a year ago on the back of a 5.7% increase in revenue to RM22.04 billion from RM20.86 billion.

“2018 was marked by a more moderate economic growth, with increased head-winds on both global and domestic fronts and banks were faced with a more challenging business climate. Against this backdrop, the Public Bank group was able to sustain stable profitability due to its continuous efforts to drive its loans and deposits business, coupled with the group’s strong asset quality and prudent cost management,” said Public Bank founder Tan Sri Teh Hong Piow (pix).

The bank achieved 4.2% loan growth in 2018 and its lending strategy remained focused on consumer financing for the purchase of residential properties and passenger vehicles, as well as extension of credit to small and medium enterprises for purchase of commercial properties and working capital.

Its total customer deposits achieved growth of 6.2% to RM339.2 billion in 2018. The deposit growth contributed to the group’s strong funding position, as reflected in its gross loan to fund and equity ratio of 79.0% as at the end of 2018.

Public Bank continued to maintain a low gross impaired loans ratio of 0.5%, well below the domestic banking system’s gross impaired loans ratio of 1.5%.

“Further, the Public Bank group’s loan loss coverage ratio stood high at 126.0% as at the end of 2018. Including the RM1.8 billion regulatory reserves that the group had set aside, the group’s loan loss coverage ratio would be 237.5%. This has provided the group a strong buffer to weather any uncertainties ahead,” said Teh.

After the payment of the second interim dividend, the group’s common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio will stand at 13.1%, 13.7% and 16.3% respectively.

In 2018, Public Bank’s overseas operations contributed 9.7% to the group’s overall pre-tax profit, largely contributed by Public Financial Holdings td Group in Hong Kong and Cambodian Public Bank Plc.

Looking ahead, Public Bank expects the overall outlook for the domestic banking sector to remain stable underpinned by resilient private sector activity.

“There will be continued growth opportunities for the domestic banking industry underscored by ongoing demand for affordable housing and the growing small and medium enterprises,” said Teh.

Public Bank’s share price gained 6 sen or 0.24% to close at RM25.06 today on 4,402,500 shares done.

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Bintulu Port job termination – no major impact on Muhibbah seen

PETALING JAYA: Analysts view the impact from the termination of Muhibbah Engineering (M) Bhd’s contract by the Bintulu Port Authority as managable and they expect the Cambodian airport concession to hold the fort for the group.

MIDF Research displayed a conservative stance by down-grading its rating on the stock to “neutral” with an unchanged target price RM3.15.

According to the research house’s rough estimates, with work reaching a progress of 45-50%, the contract’s current unbilled value ranges between RM200 million and RM220 million, which is at about 9.7% of the group’s out-standing order book of RM2.1 billion.

“Assuming that fair com-pensation for Muhibbah is agreed upon, we need to caution that reparation could take a while to materialise. Based on current price, our target price implies 7.5% upside to investors and earnings yield of 6.7%. Moving forward, we believe any retracement in share price will unveil attractive position for entry,” it said.

The research house noted that based on the current circumstances, the risk is concentrated on near-term earnings projection and the impact will be muted for FY20 onward.

Muhibbah is currently in negotiations with Bintulu Port Authority in relation to the compensation.

Alliance DBS Research, on the other hand, maintained its “buy” call on the stock at a lower target price of RM3.55 (previously RM3.65) in view of a lower sustainable order book.

It said the termination was due to the government’s concerted efforts to reduce its borrowings to a manageable level and not from any non-performance of the contractor.

Alliance DBS estimates that Muhibbah’s 51% stake in the project is worth an estimated RM298 million or circa 16% of its outstanding construction order book, assuming that 20% of work done at Bintulu Port.

It has cut the group’s FY19-20 earnings forecasts by 5-6% to account for the loss of the Bintulu Port contract.

However, Alliance DBS noted that Muhibbah’s construction division has taken a supporting role in the group given the strong growth of its Cambodian airport concessions, which contribute 70% of the group’s bottom line.

Kenanga Research expects traffic growth at the Cambodian airports to remain robust at high teens and it remains one of its major earnings contributors.

“Muhibbah’s outstanding order book currently stands at RM1.8 billion (construction: RM1.3 billion, cranes: RM500 million) providing it with at least two years of visibility.

Following the termination, Kenanga expects some knee-jerk selling of its shares, but it could present a compelling entry level given minimal impact from the termination.

Muhibbah’s share price was down 19 sen or 6.35% to close at RM2.80 last Friday with 4.57 million shares changing hands.