Revenue came in 7.9% higher at RM5.38 million in the reported quarter compared to RM4.98 million in Q1 FY2022.

In its filing with Bursa Malaysia, Axiata said the turnaround was mainly contributed by its mobile operations in Indonesia and Cambodia, infrastructure business and new revenue segment from fixed broadband in Indonesia.

The group’s basic earnings per share had risen to 0.8 sen per share compared to a loss per share of 0.5 sen a year ago.

No dividend was proposed for this reported quarter.

Disappointing quarterly results

Despite its return to profitability, Axiata’s quarterly results failed to impress research houses.

Public Investment Bank Bhd in its research note said the company’s Q1 FY2023 performance was short of expectation, revising their target price to RM2.40 and downgrading its call to “underperform”.

“Given this disappointing set of results, we slash our FY2023-2025F earnings forecast by an average of 40%,” Public Investment declared.

“Although the group has completed several acquisitions in high-growth emerging markets last year, we do not expect them to make any meaningful earnings contribution to compensate for the loss of income from Celcom anytime soon,” the research house said.

Public Investment added that it is concerned with regulatory and investment risks attached to these operations.

Furthermore, the disposal of Celcom, its largest earnings generator, was evident in the group’s core net profit falling RM83.2 million in Q1 FY2023, the research house said.

“The discrepancy was largely due to losses incurred by its recently-acquired fixed broadband company in Indonesia (Link Net), Dialog in Sri Lanka and Boost,” Public Investment said.

Link Net is one of Axiata’s operating companies in Indonesia alongside XL Axiata. Dialog Axiata Plc is the group’s telecommunications subsidiary based in Sri Lanka, while Boost fronts the group’s fintech business.

In addition, Public Investment sees future challenges for Axiata to expand its customer base and market share as it faces stiff competition from industry incumbents.

“Given the lofty investment cost, we are also concerned of impairment risk in the distant future, judging from its past ventures into high-growth markets such as Nepal, Sri Lanka, and India,” it said.

Meanwhile, AmInvestment Bank Bhd has maintained their “hold” call with a lower fair value of RM3.10 per share from RM3.40 per share.

“We slashed FY2023-FY2025F earnings by 35% after Axiata’s Q1 FY2023 results fell short of expectations,” AmInvest said.

It said the group’s core earnings of RM168 million accounted for only 11% of their previous full-year FY2023F net profit and 14% of consensus.

“The deviation stemmed from the underperformance of XL Axiata, Dialog, and Ncell,” its research note read.

“Moving forward, we remain cautious on the company’s prospects due to macro headwinds that could potentially derail its frontier markets’ performance,” AmInvest said.

The research house added that the group’s financial performance is also susceptible to the rising interest rate environment due to its highly leveraged FY2023F net debt and earnings before interest, taxes, depreciation and amortisation (Ebitda).

As of noon, Axiata’s share price is down 7 sen or 2.36% at RM2.89, giving it a market capitalisation of RM26.53 billion.