KUALA LUMPUR (Sept 10): Axiata Group Bhd's share price fell as much as 87 sen or 17.83% to RM4.01 so far today while Digi.Com Bhd shares dropped 59 sen or 12.07% to RM4.30 following news that Axiata and Telenor ASA's planned merger was called off.

At 11:12am, Axiata pared losses at RM4.18 as Bursa Malaysia's top decliner. The counter saw some 23 million shares traded.

Bursa said in a special announcement today that short selling under propriety day trading (PDT) and intraday short selling (IDSS) for Axiata shares has been suspended for the rest of the day as the last done price of the approved securities dropped more than 15% from the reference price. "The short selling under PDT and IDSS will only be activated the following trading day, Wednesday, Sept 11, 2019 at 08:30am," it said.

Digi also cut losses at RM4.59 among top decliners with some 12 million shares traded. Telenor ASA is the parent company of Digi's largest shareholder Telenor Asia Pte Ltd.

Analysts downgraded Axiata and Digi shares today after Axiata said on Friday that it and Telenor ASA had mutually agreed to end discussions on the planned non-cash combination of their telecommunication and infrastructure assets in Asia, due to complexities involved in the transaction.

Today, Public Investment Bank Bhd said it downgraded its call on Axiata shares from trading sell from neutral.

"As we were not confident that the proposed merger would materialise despite the sharp run-up and re-rating in share prices, we did not factor in any potential impact in our forecasts and valuations. Although our TP (target price) on Axiata remains unchanged at RM4.00, its current share price suggests a downside potential of 18%.

"As such, we cut our rating on Axiata from Neutral to Trading Sell. Meanwhile, Digi's share price is trading close to our unchanged TP of RM4.72, maintain Neutral," Public Investment Bank analyst Eltricia Foong said in a note.

Meanwhile, AllianceDBS Research Sdn Bhd said Axiata and Digi's share prices have risen 18% and 8% respectively since the merger was announced in May 2019. At current levels, the market has priced in some potential synergies from the merger, according to AllianceDBS analyst Toh Woo Kim.

"As such, we believe share prices for both companies will react negatively to this new development. Our HOLD calls and current TPs for Axiata (RM4.60 TP) and Digi (RM4.80 TP) remain unchanged, as we had yet to input any merger synergies into our estimates," Toh said in a note.

Affin Hwang Investment Bank Bhd downgraded Axiata and Digi. Affin Hwang analyst Isaac Chow said it lowered its Digi TP to RM4.55 from RM5, while maintaining its hold call on the counter after incorporating a lower long-term growth rate due to a lack of long-term growth catalyst.

"In the absence of a value-accretive M&A, we expect Axiata to trade at discount to its RNAV (revalued net asset value) and hence, downgrade Axiata to SELL (from Hold) with a lower TP of RM4.25 (from RM5.20)," Chow said in a note.