Celcom Axiata (Celcom) has restarted its successful sale campaign to reward loyal customers and attract new ones. We view the campaign positively in light of the typically subdued first quarter for telcos and its efforts to further drive growth in its mobile and the fast growing broadband segment. Celcom’s mobile market share widened 2.3%-points in 9M09, largely at the expense of Maxis, taking the largest share of the youth market outside the Klang Valley (and closing in on Maxis’ and Digi’s stronghold in the Klang Valley). At the current share price, the market is attaching little or no value to its overseas mobile assets, which we believe is unjustified given the growing importance and contribution from these high growing assets. BUY.
Maintain BUY. We make no changes to our FY09-FY11 forecasts but note the upside risks to earnings given that management has been conservative on its guidance for revenue and EBITDA growth in the ‘low-teens’ and ROE of high single digit for FY09/10. We forecast revenue growth of 16.1% and are modeling for EBITDA growth of 12.7% while our FY09 ROE is projected at 7.8%. We continue to like Axiata for its regional growth prospects via the strategic footprint in 10 counties, superior earnings growth (versus domestic pure play telecom exposures) and the improved overseas traction. Our SOP target on the stock is RM3.77. We expect the share price to re-rate as foreign interest returns to the market.