KUALA LUMPUR (Feb 24): The research community cut earnings forecast for Axiata Group Bhd today after it reported weaker-than-expected quarterly results yesterday.

In a note to investors today, Public Investment Bank Research's analyst Eltricia Foong said Axiata's financial year ended Dec 31, 2016 (FY16) core net profit stood at RM1.42 billion, which only accounted for 80% of her estimates and 85% of consensus forecasts.

Therefore, Foong said she is cutting Axiata's FY17 and FY18 earnings forecast by 17% to 18% respectively to factor in lower contribution from Malaysia, Indonesia and Bangladesh, and higher share of associate losses.

Axiata's Malaysia and Indonesia operations contribute almost 60% of the group's total revenue for FY16.

While Foong decided to maintain a 'neutral' call, she also trimmed her discounted cash flow-based target price to RM4.48, from RM5.

"Axiata's gross debt-to-earnings before interest, tax, depreciation and amortisation has reached an uncomfortable level of 2.8 times and we believe the group is pressured to divest some of its stakes in its overseas subsidiaries in order to rebuild its cash reserves," she said.

"This may be seen as a near-term catalyst, depending on the valuations that it could fetch in the exercise," she added.

CIMB Research's analyst Foong Choong Chen, meanwhile, said he is cutting Axiata's FY17 and FY18 core earnings per share by 41% and 28% respectively to factor in the full-year consolidation of Airtel Bangladesh Ltd losses, higher normalised depreciation, and losses at Idea Cellular Ltd and reduced M1 Ltd earnings after its 4QFY16 results.

Choong Chen, who maintained his 'hold' call on Axiata with an unchanged target price of RM4.50, said while Robi Axiata Ltd's valuation has been cut, this was offset by higher fair values for PT XL Axiata Tbk, thanks to stronger rupiah, and Idea.

As at 12:12pm, Axiata was down by 17 sen or 3.75% to RM4.36, being the third-largest loser across the local market, giving it a market capitalisation of RM40.1 billion.