ANALYSTS are constructive on prospects for Axiata Group and its Indonesian subsidiary, XL Axiata, after they introduced the acquisition of a 66 per cent stake in Hyperlink Web.
The mentioned transaction value of the gross sales buy settlement quantities to 4,800 rupiah per share of Hyperlink Web, which interprets to a complete of 8.72 trillion rupiah (S$821 million). Axiata Funding Indonesia will purchase 46 per cent of excellent Hyperlink Web (Hyperlink) shares whereas XL Axiata (XL) will purchase 20 per cent.
Following this announcement, UOB Kay Hian analyst Selvi Ocktaviani sees a constructive earnings accretion of 3-9 per cent for the Indonesian telecommunications companies operator, XL. Primarily based on the 2023 estimates, she expects XL to e-book the Hyperlink acquisition as an funding affiliate and initiatives a web revenue of 46-118 billion rupiah, mentioned UOBKH’s analysis report on Monday (Jan 31).
The analyst famous that there’s room to help fluctuations in profitability and rates of interest. Outcomes from a sensitivity evaluation present that XL should have a development in earnings so long as the Hyperlink Web revenue decreases by lower than 25 per cent or rate of interest doesn’t spike greater than 225 foundation factors, she mentioned.
Ocktaviani assumes that XL will elevate debt to fund the acquisition, elevating the estimated web debt to earnings earlier than curiosity, taxes, depreciation and amortisation (Ebitda) by 2.5 occasions. Nevertheless, that is nonetheless seen as a “small impression” on XL’s leverage, the report said.
With Hyperlink’s sturdy buyer bases of center to excessive spending talents in main cities, the acquisition can also be anticipated to generate synergies and produce extra prospects.
“The Hyperlink acquisition is predicted to generate synergies from the sharing of spine and fibre optic infrastructures. XL can enter fixed-mobile convergence technique by providing Hyperlink prospects with XL-Axis cellular knowledge packages and vice versa,” she mentioned. She anticipates the expansion of XL’s competitiveness and buyer base from the settlement with Hyperlink.
Likewise, CGS-CIMB is constructive on the acquisition and believes that XL Axiata is “beefed up and able to seize development”.
The brokerage believes valuations for the deal had been affordable and that the settlement will improve XL’s earnings per share (EPS). The worth tag of 4,800 rupiah for a Hyperlink Web share is valued at an affordable FY 2022 enterprise worth to Ebitda ratio of 5.5 and price-to-earnings ratio of 14.4, CGS-CIMB mentioned.
CGS-CIMB expects XL to make use of a mixture of inside money and new debt to fund the acquisition and subsequently, estimates web debt to Ebitda ratio to rise from 0.29 to 0.47 however believes it’s nonetheless within the “wholesome” vary. It additionally initiatives that the deal will likely be barely core EPS accretive by 0.7-3.1 per cent from FY 2022 to FY 2023 and by a much bigger 3.4-9.3 per cent from FY 2024 to FY 2031.
With the acquisition of Hyperlink Web, XL is positioned to seize development and strengthen market place, CGS-CIMB highlighted. The variety of properties XL serves will improve from about 600,000 to three.4 million and this enables the corporate to seize Indonesia’s sturdy demand for mounted broadband, the brokerage mentioned.
“There are additionally income synergies from cross-selling cellular, broadband and pay TV companies to the mixed subs base, in our view,” CGS-CIMB added.
It is usually of the opinion that providing convergence merchandise will assist to strengthen XL’s market place and lift its buyer lifetime worth as extra of them would keep as prospects for an extended interval. Using frequent back-end methods additionally generates price synergies and each events can leverage one another’s fibre spine, the brokerage mentioned.
