Malaysia’s largest mobile telco by revenue is exposed to the Bangladesh market via its 61%-owned Robi Axiata PLC, the country’s second largest mobile network operator.
The Bangladesh government had imposed curfews and suspended internet and text message services since last Thursday, cutting the nation of 174 million people off from the world.
The turmoil sparked off over two weeks ago as university students protested against the government’s imposition of quotas for government jobs. Nearly 200 people have been killed so far as police cracked down on protesters.
In a note today, Apex opined the lockdown would have an impact on Robi due to its reliance on the prepaid mobile sector.
The subsidiary contributes 18% of Axiata’s earnings before interest, taxes, depreciation and amortisation (Ebitda), the research house noted.
“Bangladesh’s authorities have enforced a nationwide curfew as well as shutting down mobile and broadband internet services.
“Axiata’s exposure to Bangladesh is primarily through its 61% ownership in Robi, and its tower assets via 63%-owned Edotco,” it said.
However, Apex said there would be “minimal impact” on Edotco due to the security provided by long-term contracts, which ensure consistent revenue.
It maintained its “hold” call on Axiata but cut its target price by 13% to RM2.55 from RM2.94 on rising macroeconomic risk from the frontier market and weaker investor sentiment.
The research firm said Axiata continues to face geopolitical, macroeconomic and regulatory risks, in addition to the strengthening US dollar and high interest rates.
Share price hits six-month low
Meanwhile, Axiata’s shares extended their decline for the fifth day in a row, hitting a six-month low.
It hit an intraday low of RM2.42, down seven sen or 2.8%, its lowest since Jan 4, valuing the group at RM22.3 billion. It is only up 1.7% year-to-date.
It snapped a streak of three consecutive quarterly losses when it posted a RM60.03 million net profit for the first quarter ended March 31 (Q1 FY2024).
However, this was a 19% drop from the RM73.85 million net profit a year ago, mainly due to higher foreign exchange losses and finance costs. Quarterly revenue rose 13% year-on-year to RM5.66 billion from RM5 billion.
Axiata suffered losses of RM695 million in Q4 FY2023, RM797.4 million (Q3 FY2023), and RM576.2 million (Q2 FY2023).
The company was incorporated in 1992 as the international business division of state-owned Telekom Malaysia (TM). It was subsequently spun off from TM and listed in 2008.
Khazanah Nasional and other state-owned funds combined hold more than 70% of Axiata’s shares.