Axiata Group Bhd
(Dec 5, RM6.79)
Neutral with target price (TP) of RM7.10. Axiata Group Bhd (Axiata) announced that its indirect subsidiary, Axiata Digital Advertising (ADA), had entered into a subscription and shareholders agreement with Adknowledge International (ADK) and Adknowledge Asia Pacific (AAP) to subscribe to an 80% stake in AAP for up to US$9 million (RM31.24 million) cash.

AAP will enhance Axiata’s capability in digital advertising services and enable synergistic opportunities for its mobile services. However, the acquisition will not have any material financial effect on the group and we maintain our “neutral” call on Axiata with an unchanged TP. Axiata offers the most upside potential to our TP in our telco coverage.

ADK is a multi-channel global digital marketing company based in Missouri, the USA. It partners with agencies, brands and publishers through digital video, social media, apps/mobile, email and other contents. ADK’s registered trademarks include AdParlor, AdBistro, AdStation, TriVu Media and Giant Media. AAP is a wholly-owned subsidiary of ADK and has been designated as the joint-venture company between ADA and ADK to pursue digital advertising in the Asia-Pacific region. AAP is incorporated and registered in Singapore.

Axiata is hopeful that its partnership with ADK will enable the group to ride on the vibrant digital marketing space in Asia-Pacific. Axiata has the necessary mobile and digital services and substantial subscriber base in Asean and South Asia to reap synergies from the partnership. We are positive on the acquisition but are unable to quantify financials from the new venture at this juncture.

We believe it will benefit from the regional growth story as well as a better 2015 performance from Celcom (post-IT transformation) and XL (post-Axis integration). — Public Investment Bank, Dec 5

This article first appeared in The Edge Financial Daily, on December 8, 2014.