Axiata's Edotco stake key to balance sheet strength
In a recent report, the research house noted that Axiata's balance sheet leverage remains a major overhang, with its net debt-to-earnings before interest, tax, depreciation and amortisation (Ebitda) staying 'elevated' at about three times as at the end of the first quarter of 2025 (1Q25).
Maybank IB simulated a full disposal of Edotco at an enterprise value-to-Ebitda multiple of seven to 12 times.
It estimated that a full divestment could reduce Axiata's net debt-to-Ebitda to between zero and 1.6 times.
'Our simulation indicates a significant improvement to Axiata's gearing if it hypothetically divests its entire stake in Edotco,' the investment bank said.
Although Axiata is undertaking other corporate exercises – including the XL-Smartfren merger and the divestment of its Myanmar tower operations in the second quarter of 2025 – these are unlikely to materially shift the group's leverage profile, Maybank IB said.
Notably, Edotco itself carries a relatively high net debt-to-Ebitda ratio of 3.9 times and remains a material contributor to Axiata's consolidated gearing, it said.
As part of its broader strategy, Maybank IB said Axiata has already identified Edotco as one of its monetisable assets.
It maintained its 'buy' call on the stock, with an unchanged target price of RM2.90 a share.
'We continue to view Axiata's overall risk-reward as positive, with net profit recovery and balance sheet repair (increasingly gaining traction among investors) being potential re-rating catalysts,' Maybank IB said.
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