KUALA LUMPUR (Aug 30): Local and foreign research firms today downgraded their Axiata Group Bhd earnings forecasts and stock recommendations after they said the mobile telecommunication network provider reported net profit which was below market expectation.

Yesterday, Axiata said net profit stood at RM204.09 million in the second quarter ended June 30, 2019 (2QFY19) versus a net loss of RM3.36 billion a year earlier.

Axiata said it registered cumulative 1HFY19 net profit at RM913.15 million compared to a net loss of RM3.5 billion a year earlier.
 
AllianceDBS Research Sdn Bhd analyst Toh Woo Kim wrote in a note today that Axiata's 2QFY19 core net profit of RM228.8 million took 1H1FY9 earnings to 35% and 39% of AllianceDBS' and consensus full-year estimates respectively.

He said Axiata's 1H1FY9 earnings were below expectations. Toh said AllianceDBS cut its FY19 to FY21 earnings forecast for Axiata by 17% to 19% after adjusting for higher taxation, and losses for its digital businesses.

"In the near term, we expect Axiata’s share price to be buoyed by the proposed merger with Telenor’s Asian operations. We are generally positive on this development as the merger will create a sizeable entity with strong presence across nine countries and potentially significant synergy on bigger economies of scale, Toh said.

The analyst said AllianceDBS raised its Axiata share target price (TP) to RM4.60 from RM4.30 while maintaining its hold call for the stock.

Axiata's share price closed up two sen or 0.4% today at RM5.05 with 4.24 million units traded.
 
Affin Hwang Investment Bank Bhd analyst Isaac Chow said in a note today that although Axiata's operational performance had beaten Affin Hwang's forecast, Axiata's core net profit was below market and Affin Hwang's expectation due to higher-than-expected tax rate.

Chow said Affin Hwang cut its Axiata FY19 core EPS forecast by 10% but raised the FY20 and FY21 estimates by 4%. In tandem, Affin Hwang upped its Axiata TP to RM5.20 from RM5.17.

"We downgrade Axiata to Hold from Buy in view of the limited share price upside. While we like the proposed merger with Telenor Asia, we believe that the positives are largely priced in. (Axiata share price has increased by 25% since the announcement in May 2019).

Among foreign research firms, Credit Suisse analyst Danny Chan downgraded the recommendation on Axiata to neutral from outperform with a TP of RM5.10, Bloomberg reported.

Bloomberg said Axiata's average TP is RM5.03.

"Analysts raised their consensus one-year TP for the stock by 6.6% in the past three months. Forecasts range from RM3.95 to RM6.

"In the past four years and two months, Credit Suisse has rated Axiata outperform three times and neutral twice," Bloomberg reported.