Malaysia Company Guide Group

Version 15 | Bloomberg: AXIATA MK | Reuters: AXIA.KL Refer to important disclosures at the end of this report

DBS Group Research . Equity 16 Jan 2020

BUY (Upgrade from Hold) Improving prospects Last Traded Price ( 15 Jan 2020): RM4.16 (KLCI : 1,585.14) Price Target 12-mth: RM4.80 (15% upside) (Prev RM4.60) Upgrade to BUY with revised RM4.80 TP. Following the termination of its merger discussion with , Axiata’s share Analyst price has retracted by 21% from its recent peak. At the current Woo Kim TOH +60 32604 3917 [email protected] price, we think the risk-reward profile for Axiata is attractive, What’s New with a valuation of 6.1x FY20 EV/EBITDA (-1SD below the 5-year average). Improvement in ’s performance remains the  Favourable scenario for 5G spectrum auction in key driver for Axiata’s earnings, and we view this positively in Malaysia as MCMC adopts consortium approach to light of muted risks for 5G spectrum and capex in Malaysia. The promote network sharing among operators potential monetisation of tower and/or digital assets will be a  Some positives on Nepal CGT issues with favourable bonus, if it materialises. We upgrade our recommendation to ruling from international arbitration court BUY with a revised SOP-based TP of RM4.80.

 Attractive risk-reward after recent correction; upgrade Where we differ: We are more optimistic on Celcom’s to BUY with revised SOP-based TP of RM4.80

turnaround. Axiata’s share price is highly correlated to Celcom’s performance, as the latter contributes >50% of group earnings and SOP valuation. We believe consensus is still cautious about Price Relative near-term earnings weakness at Celcom.

Potential catalysts. A strong pick-up in Celcom’s performance will be the key catalyst for a potential re-rating of the stock. The IPO of Axiata’s tower arm, edotco should also boost sentiment and provide price discovery for the business unit.

Valuation: Forecasts and Valuation Our RM4.80 TP for Axiata is based on SOP valuation. FY Dec (RMm) 2018A 2019F 2020F 2021F

Revenue 23,886 24,562 25,388 26,321 EBITDA 4,987 8,853 9,315 9,938 Key Risks to Our View: Pre-tax Profit (4,346) 2,125 2,416 2,867 Regulatory and competition risks. Intense competition and Net Profit (5,035) 1,009 1,222 1,481 unfavourable regulatory environment are key risks for Axiata in Net Pft (Pre Ex.) 1,010 1,009 1,222 1,482 countries that it operates. Net Pft Gth (Pre-ex) (%) (16.2) (0.1) 21.1 21.3 EPS (sen) (56.1) 11.2 13.6 16.5 EPS Pre Ex. (sen) 11.3 11.2 13.6 16.5 At A Glance EPS Gth Pre Ex (%) (16) 0 21 21 Issued Capital (m shrs) 9,164 Diluted EPS (sen) 11.3 11.2 13.6 16.5 Mkt. Cap (RMm/US$m) 38,120 / 9,364 Net DPS (sen) 9.50 9.56 11.6 14.0 Major Shareholders (%) BV Per Share (sen) 195 196 199 201 Khazanah 44.5 PE (X) nm 37.0 30.5 25.2 EPF 14.0 PE Pre Ex. (X) 37.0 37.0 30.5 25.2 P/Cash Flow (X) 6.1 4.9 5.0 4.7 Skim ASB 8.5 EV/EBITDA (X) 11.4 6.4 6.1 5.7 Free Float (%) 55 Net Div Yield (%) 2.3 2.3 2.8 3.4 3m Avg. Daily Val (US$m) 2.8 P/Book Value (X) 2.1 2.1 2.1 2.1 GIC Industry : Communication Services / Telecommunication Services Net Debt/Equity (X) 0.6 0.6 0.5 0.5 ROAE (%) (23.9) 5.7 6.9 8.3 Bloomberg ESG disclosure score (2018)^ 37.6 Earnings Rev (%): 0 0 0 - Environmental / Social / Governance Consensus EPS (sen): 11.6 14.2 16.7 20.9 / 47.4 / 66.1 Other Broker Recs: B: 8 S: 1 H: 18 Source of all data on this page: Company, AllianceDBS, Bloomberg ^ refer to back page for more information Finance L.P

ed: CK/ sa: WMT, PY, CS Company Guide

Axiata Group

WHAT’S NEW Attractive risk-reward profile

Favourable scenario for 5G spectrum auction in Malaysia: For for improvements as its current EBITDA margin of 38% is still 5G spectrum, the regulator MCMC (Malaysia Communication below peers’ margins of 49-54% (post-MFRS 16). and Multimedia Commission) has indicated that it will award Some positives on Nepal tax issue: On 19 Dec 2019, Axiata a combined spectrum in the 700MHz and 3.5GHz bands to a confirmed that the International Centre for Settlement of single entity, comprising a consortium formed by multiple Investment Dispute (ICSID) has granted a provisional licensees. The intention is to promote network sharing among measures order in favour of for the arbitration the telecom operators in order to minimise capex costs and proceedings regarding the on-going capital gain tax (CGT) avoid duplication of infrastructure. issues. The interim order restrains the Nepalese government We believe this outcome is favourable for Malaysian telcos from demanding Ncell to pay NPR22.4bn (about RM807m (including Celcom), as potential spectrum and capex risks for equivalent) in outstanding CGT. 5G is significantly lesser now. It also helped to eliminate To recap, Axiata was slapped with a CGT bill of NPR62.6bn market speculation that all 5G spectrum could be allocated to following its USD1.4bn acquisition of an 80% stake in Ncell a single telco (i.e. ) to build a wholesale 5G from TeliaSonera Norway. The amount was reduced to national network for the country. NPR45bn, after a favourable ruling from Nepal’s Supreme Celcom is in a good position: We believe Celcom and Maxis Court in April 2019. Axiata had previously paid about will likely partner together to form a consortium, given that NPR23bn to the tax office. they already have an existing memorandum of understanding Upgrade to BUY with revised RM4.80 TP. Following the (MoU) to explore active 5G RAN (radio access network) termination of its merger discussion with Telenor, Axiata’s sharing. If we include DiGi and/or even TM into the picture, share price has retracted by 21% from its recent peak. At the this will make the consortium the favourite contender to win current price, we think the risk-reward profile for Axiata is under the beauty contest process, as other possible attractive, with a valuation of 6.1x FY20 EV/EBITDA (-1SD consortiums’ proposal will likely look pale in comparison. below the 5-year average). Improvement in Celcom’s Overall, we expect incumbents to work more closely together performance remains the key driver for Axiata’s earnings, and going forward in order to achieve MCMC’s key targets under we view this positively in light of muted risks for 5G spectrum the 5-year National Fiberisation and Connectivity Plan (NFCP). and capex in Malaysia. The potential monetisation of tower In our opinion, this should foster rational competition among and/or digital assets will be a bonus, if it materialises. We the players and help to keep data pricing stable. upgrade our call to BUY with revised SOP-based TP of RM4.80. Cost reduction to drive better margins: Amid the benign competition in Malaysia mobile market, we believe Celcom Slight revision in SOP-based TP. We revise our TP for Axiata to should be able to keep its service revenue stable (1-2% RM4.80 (from RM4.60) after updating for; 1) Lower risk-free annual growth over FY20-22). Much of the improvement in rate for Celcom (from 4.0% to 3.5%) in line with 10-year profitability is expected to come from cost efficiency MGS yield; 2) DBS TP for XL Axiata; and 3) Latest share price initiatives, particularly on network costs reduction. Celcom for and Vodafone-Idea. targets to increase its EBITDA margins by 3-4% points by

2022, which we think it’s conservative. There is a lot of room

SOP Valuation Subsidiaries Valuation Method Effective Valuation Valuation Per Axiata stake (RMm) per share share Celcom DCF (WACC 7.0%, TG 1.5%) 100.0% 25,225 2.86 XL DBS TP 66.6% 7,122 Rp4,180 0.81 Ncell 6x CY20 EBITDA 80.0% 6,624 0.75 Dialog Market Price 83.3% 2,308 Rp12.6 0.26 Robi 6x CY20 EBITDA 68.7% 2,759 0.31 Vodafone-Idea Consensus TP 1.6% 196 Rs. 7.0 0.02 Smart 6x CY20 EBITDA 82.5% 2,357 0.27 Total value of subsidiaries 46,591 5.28 Holding company net cash (debt) (4,229) -0.48 Total equity value 42,362 4.80

Source of all data: Company, AllianceDBS

Page 2

Company Guide

Axiata Group

Revenue contribution (in RM m) CRITICAL DATA POINTS TO WATCH 30,000 Celcom XL Axiata Ncell Dialog Robi Smart & Others Celcom is the key contributor. Teething IT issues prevented Celcom 25,000 from launching new plans in 2014 and this affected dealers’ confidence. These issues were finally resolved by 2Q15 after some 20,000 delays, but the damage was already done. This was reflected in the decline in subscriber base FY14-17. To regain momentum, Celcom 15,000 was more aggressive in the market in 1H15 and initially showed 10,000 some positive results. However, rivals responded with aggressive pricing, leading to a net churn in Celcom subscribers as well as 5,000 decline in average revenue per user (ARPU) by end-2016. - FY14 FY15 FY16 FY17 FY18 FY19F FY20F

Overall, growth was still relatively tough for Celcom in FY17-18 because of intense competition in Malaysia’s mobile market. We Celcom subscribers and blended ARPU Total subscriber ('000) Blended ARPU (RM) estimate that Celcom's revenue will remain flattish in FY19-20, in 14,000 50 line with industry growth. 13,000 48 49 48 12,000 48 47 46 XL: New management and strategy. After the appointment of a 11,000 46 new CEO, XL changed its strategy to focus on profitability and 10,000 45 accelerate Axis-XL integration. Management is adopting a dual- 44 44 9,000 brand strategy – XL as the premium digital lifestyle brand and Axis 8,000 42 42 as a tactical brand for the lower-end market. The company will also 7,000 move away from its 'minute factory' strategy (high-gross-add 40 6,000 model) and concentrate instead on improving EBITDA by attracting 5,000 38 mid and high-value subscribers. Though revenue growth will be FY13 FY14 FY15 FY16 FY17 FY18 FY19F FY20F relatively muted for XL in the near term, Axiata believes that these are the right strategies for XL going forward and remains XL Axiata subscribers and blended ARPU committed to them. Total subscriber (m) Blended ARPU ('000 IDR) 70.0 36 34 35 33 33 60.0 34 Dialog and Robi. Dialog’s contribution has been relatively stable as 33 32 32 it is already the largest telecoms operator in Sri Lanka. On the other 50.0 hand, Robi’s contribution has grown significantly since FY11 on the 30 40.0 back of healthy subscriber growth and heavy capex investment 28 27 from Axiata. 30.0 26 26 20.0 24 The competitive landscape in Bangladesh is also improving, 10.0 following the merger between Robi and Airtel Bangladesh which 22 created the second largest mobile operator in the country. - 20 FY13 FY14 FY15 FY16 FY17 FY18 FY19F FY20F However, near-term profitability is still being affected given that Airtel is a loss-making entity. Group EBITDA margins (%) 44.0% Improving EBITDA margins. Overall, group EBITDA margins took a 42.1% hit in FY18 following the weak performance of Celcom and XL. We 42.0% believe margins should improve gradually going forward on the 39.6% 40.0% back of a recovery in Celcom’s margins and turnaround in XL and 37.8% Robi’s operations. 38.0% 37.4% 37.2% 36.6% 36.7% 36.0% 36.0% 34.9%

34.0%

32.0% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19F FY20F

Source: Company, AllianceDBS

Page 3

Company Guide

Axiata Group

Appendix 1: A look at Axiata’s listed history – what drives its share price?

Axiata share price vs. Celcom revenue market share Remarks Celcom is the largest revenue and Celcom share price Celcom market share 8.00 37.0% earnings contributor to Axiata.

7.00 35.0% As such, Axiata’s share price is quite correlated to Celcom’s performance. 6.00 33.0% Revenue market share is a good metric to track this

5.00 31.0%

4.00 29.0%

3.00 27.0%

2.00 25.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Sources: AllianceDBS Research, Bloomberg Finance L.P

Axiata share price vs. XL share price Remarks XL is the second largest contributor to Axiata share price XL share price 8.00 8000 Axiata.

7.00 7000 The weak performance by XL in past 6.00 6000 few years has dragged Axiata’s share price. 5.00 5000

4.00 4000

3.00 3000

2.00 2000

1.00 1000

0.00 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Sources: AllianceDBS Research, Bloomberg Finance L.P

Axiata share price vs. EBITDA and net-debt Remarks

Axiata share price Net debt Trailing EBITDA Increase in EBITDA will help share 8.00 25,000 price performance, though this should be viewed together with net debt 7.00 level. 20,000

6.00 In recent years, net debt level at 15,000 Axiata has increased considerably with the acquisition of Ncell and sharp 5.00 depreciation in ringgit. 10,000 4.00

5,000 3.00

2.00 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Sources: AllianceDBS Research, Bloomberg Finance L.P

Page 4

Company Guide

Axiata Group

Balance Sheet: Leverage & Asset Turnover (x) Comfortable gearing. As at end-Sep 2019, Axiata’s gearing was comfortable at 1.7x net debt-to-EBITDA.

Capex intensity to remain high. We expect Axiata’s FY19F capex to remain elevated at 20-25% of revenue due to its aggressive network rollout to boost mobile data leadership in key markets such as Malaysia, and Bangladesh.

Share Price Drivers: Strong turnaround for Celcom and XL. Collectively, Celcom and XL contribute more than 70% of our earnings forecasts and Capital Expenditure SOP-valuation for Axiata. We believe that a strong turnaround in the performance of Celcom and XL will be a key catalyst for a potential stock re-rating.

Tower arm IPO. Axiata has plans to monetise and list its tower arm edotco. To boost its IPO profile, edotco has been focusing on improving operating efficiencies and raising the tenancy ratio of its tower assets.

Key Risks: Forex risks. Axiata is exposed to forex risks given that all of its Environmental, Social and Governance subsidiaries and associates are foreign, except for Celcom. Bloomberg ESG Disclosure Score

44 Irrational competition. Given the already high mobile penetration rate and low ARPU in the various key markets that 42 Axiata operates in, any irrational competition will hurt its 40 subsidiaries’ growth as well as profitability. 38

36 Environment, Social, Governance: Axiata’s sustainability efforts are anchored by its 4P 34 Y2015 Y2016 Y2017 Y2018 Sustainability Framework, namely 1) Beyond Short-term Profits; AXIATA MK Equity Peers 2) Nurturing People; 3) Process Excellence & Governance; and 4) Planet & Society. In addition, the company is also committed Forward PE Band (x) to embed the 10 principles of the UN Global Compact and support 17 UN Sustainable Development Goals in its operations and KPIs.

Company Background Axiata Group is a telecommunications group in Asia which has controlling interests in mobile operators in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia.

PB Band (x)

Source: Company, AllianceDBS

Page 5

Company Guide

Axiata Group

Key Assumptions FY Dec 2017A 2018A 2019F 2020F 2021F

Celcom revenue growth (0.4) 11.3 0.20 1.74 1.35 (%) Celcom EBITDA margins 35.1 25.9 33.5 35.0 38.0 (%) XL revenue growth (%) 7.19 0.55 3.37 3.35 3.25 XL EBITDA margins (%) 35.9 37.0 39.1 38.7 39.0

Segmental Breakdown FY Dec 2017A 2018A 2019F 2020F 2021F

Revenues (RMm) Celcom 6,593 7,285 7,351 7,479 7,580 XL Axiata 7,366 6,426 6,657 6,881 7,104 Robi 3,640 3,273 3,359 3,501 3,765 Dialog 2,656 2,700 2,872 3,079 3,294 Others 4,147 4,203 4,323 4,448 4,578 Total 24,402 23,886 24,562 25,388 26,321

Income Statement (RMm) FY Dec 2017A 2018A 2019F 2020F 2021F

Revenue 24,402 23,886 24,562 25,388 26,321 Cost of Goods Sold (15,172) (15,552) (15,709) (16,073) (16,383) Gross Profit 9,230 8,334 8,853 9,315 9,938 Other Opng (Exp)/Inc (5,768) (5,429) (5,683) (5,868) (6,053) Operating Profit 3,462 2,905 3,170 3,446 3,885 Other Non Opg (Exp)/Inc 183 (131) 0.0 0.0 0.0 Associates & JV Inc (402) (24.7) 0.0 0.0 0.0 Net Interest (Exp)/Inc (1,012) (1,051) (1,045) (1,030) (1,019) Exceptional Gain/(Loss) (296) (6,044) 0.0 0.0 0.0 Pre-tax Profit 1,936 (4,346) 2,125 2,416 2,867 Tax (774) (902) (873) (935) (1,093) Minority Interest (253) 213 (244) (260) (292) Preference Dividend 0.0 0.0 0.0 0.0 1.00 Net Profit 909 (5,035) 1,009 1,222 1,481 Net Profit before Except. 1,205 1,010 1,009 1,222 1,482 EBITDA 8,986 4,987 8,853 9,315 9,938 Growth Revenue Gth (%) 13.2 (2.1) 2.8 3.4 3.7 EBITDA Gth (%) 7.1 (44.5) 77.5 5.2 6.7 Opg Profit Gth (%) 22.9 (16.1) 9.1 8.7 12.8 Net Profit Gth (Pre-ex) (%) (15.0) (16.2) (0.1) 21.1 21.3 Margins & Ratio Gross Margins (%) 37.8 34.9 36.0 36.7 37.8 Opg Profit Margin (%) 14.2 12.2 12.9 13.6 14.8 Net Profit Margin (%) 3.7 (21.1) 4.1 4.8 5.6 ROAE (%) 3.8 (23.9) 5.7 6.9 8.3 ROA (%) 1.3 (7.5) 1.6 1.9 2.2 ROCE (%) 3.7 5.5 3.7 4.2 4.7 Div Payout Ratio (%) 83.8 N/A 85.0 85.0 85.0 Net Interest Cover (x) 3.4 2.8 3.0 3.3 3.8 Source: Company, AllianceDBS

Page 6

Company Guide

Axiata Group

Quarterly / Interim Income Statement (RMm) FY Dec 3Q2018 4Q2018 1Q2019 2Q2019 3Q2019

Revenue 6,003 6,267 5,949 6,154 6,213 Cost of Goods Sold (3,832) (4,183) (3,528) (3,483) (3,412) Gross Profit 2,171 2,084 2,422 2,671 2,802 Other Oper. (Exp)/Inc (1,282) (1,701) (1,615) (1,603) (1,818) Operating Profit 889 382 807 1,068 984 Other Non Opg (Exp)/Inc (52.8) (0.3) 23.3 6.79 54.2 Associates & JV Inc 4.15 9.77 (1.2) (3.1) 0.78 Net Interest (Exp)/Inc (273) (275) (353) (410) (369) Exceptional Gain/(Loss) (186) (1,827) 500 (24.7) (136) Pre-tax Profit 382 (1,711) 977 637 534 Tax (196) (310) (193) (350) (286) Minority Interest (53.5) 359 (74.7) (83.4) (128) Net Profit 132 (1,662) 709 204 120 Net profit bef Except. 318 165 209 229 255 EBITDA 2,352 3,643 2,472 2,778 2,885

Growth Revenue Gth (%) 2.3 4.4 (5.1) 3.4 1.0 EBITDA Gth (%) 3.8 54.9 (32.1) 12.4 3.8 Opg Profit Gth (%) 0.1 (57.0) 111.0 32.4 (7.9) Net Profit Gth (Pre-ex) (%) 46.9 (48.0) 26.2 9.6 11.6 Margins Gross Margins (%) 36.2 33.2 40.7 43.4 45.1 Opg Profit Margins (%) 14.8 6.1 13.6 17.4 15.8 Net Profit Margins (%) 2.2 (26.5) 11.9 3.3 1.9

Balance Sheet (RMm) FY Dec 2017A 2018A 2019F 2020F 2021F

Net Fixed Assets 26,910 27,290 27,835 28,173 28,354 Invts in Associates & JVs 8,012 294 294 294 294 Other LT Assets 23,187 24,070 24,070 24,070 24,070 Cash & ST Invts 6,813 5,469 6,062 6,277 6,655 Inventory 174 219 164 169 175 Debtors 4,497 4,693 4,912 5,078 5,264 Other Current Assets 318 1,862 1,862 1,862 1,862 Total Assets 69,911 63,898 65,200 65,923 66,675

ST Debt 4,388 4,474 4,474 4,474 4,474 Creditor 12,617 11,177 12,084 12,364 12,602 Other Current Liab 1,291 2,730 2,730 2,730 2,730 LT Debt 14,796 14,647 14,647 14,647 14,647 Other LT Liabilities 6,315 7,656 7,656 7,656 7,656 Shareholder’s Equity 24,731 17,477 17,628 17,811 18,034 Minority Interests 5,773 5,738 5,982 6,241 6,533 Total Cap. & Liab. 69,911 63,898 65,200 65,923 66,675

Non-Cash Wkg. Capital (8,919) (7,133) (7,875) (7,985) (8,030) Net Cash/(Debt) (12,371) (13,652) (13,059) (12,844) (12,466) Debtors Turn (avg days) 69.4 70.2 71.4 71.8 71.7 Creditors Turn (avg days) 492.4 549.2 423.4 437.2 441.1 Inventory Turn (avg days) 6.9 9.1 7.0 6.0 6.1 Asset Turnover (x) 0.3 0.4 0.4 0.4 0.4 Current Ratio (x) 0.6 0.7 0.7 0.7 0.7 Quick Ratio (x) 0.6 0.6 0.6 0.6 0.6 Net Debt/Equity (X) 0.4 0.6 0.6 0.5 0.5 Net Debt/Equity ex MI (X) 0.5 0.8 0.7 0.7 0.7 Capex to Debt (%) 26.0 37.5 32.6 32.5 32.6 Z-Score (X) 1.1 0.8 1.1 1.1 1.2

Source: Company, AllianceDBS

Page 7

Company Guide

Axiata Group

Cash Flow Statement (RMm) FY Dec 2017A 2018A 2019F 2020F 2021F

Pre-Tax Profit 1,936 (4,346) 2,125 2,416 2,867 Dep. & Amort. 5,986 7,645 5,683 5,868 6,053 Tax Paid (774) (902) (873) (935) (1,093) Assoc. & JV Inc/(loss) 402 24.7 0.0 0.0 0.0 Chg in Wkg.Cap. 732 (1,681) 742 109 45.3 Other Operating CF (2,550) 5,363 0.0 0.0 0.0 Net Operating CF 5,733 6,104 7,678 7,459 7,871 Capital Exp.(net) (4,984) (7,178) (6,228) (6,206) (6,234) Other Invts.(net) 140 (0.2) 0.0 0.0 0.0 Invts in Assoc. & JV (164) (57.0) 0.0 0.0 0.0 Div from Assoc & JV 92.6 90.2 0.0 0.0 0.0 Other Investing CF (251) 122 0.0 0.0 0.0 Net Investing CF (5,167) (7,023) (6,228) (6,206) (6,234) Div Paid (379) (691) (857) (1,039) (1,259) Chg in Gross Debt (1,600) (597) 0.0 0.0 0.0 Capital Issues 3,343 774 0.0 0.0 0.0 Other Financing CF (233) (158) 0.0 0.0 0.0 Net Financing CF 1,130 (672) (857) (1,039) (1,259) Currency Adjustments (216) (162) 0.0 0.0 0.0 Chg in Cash 1,480 (1,753) 593 215 378 Opg CFPS (sen) 55.7 86.8 77.3 81.9 87.2 Free CFPS (sen) 8.34 (12.0) 16.2 14.0 18.3 Source: Company, AllianceDBS

Target Price & Ratings History

Source: AllianceDBS Analyst: Woo Kim TOH

Page 8

Company Guide

Axiata Group

^ Bloomberg ESG Disclosure Scores rate companies annually based on their disclosure of quantitative and policy-related ESG data. It is based on a scoring scale of 0-100, and calculated using a subset of more than 100 raw data points it collects on ESG. It is designed to measure the robustness of companies' disclosure of ESG information in their reporting/the public domain. Based on Bloomberg disclosures, as of 25 Jan 2019, the global ESG disclosure average score is 24.92 and 22.14, 28.26, 49.97 for Environmental, Social and Governance, respectively.

AllianceDBS recommendations are based on an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return, i.e., > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame) *Share price appreciation + dividends

Completed Date: 16 Jan 2020 08:10:29 (MYT) Dissemination Date: 16 Jan 2020 08:14:06 (MYT)

Sources for all charts and tables are AllianceDBS unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by AllianceDBS Research Sdn Bhd (''AllianceDBS''). This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of AllianceDBS Research Sdn Bhd (''AllianceDBS'').

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in , Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Page 9

Company Guide

Axiata Group

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or 2 his associate does not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Dec 2019. 2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

Page 10

Company Guide

Axiata Group

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Page 11

Company Guide

Axiata Group

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

United This report is produced by AllianceDBS Research Sdn Bhd which is regulated by the Securities Commission Malaysia. Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor, International Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated Financial by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the Centre DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as Emirates defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by AllianceDBS Research Sdn Bhd (''AllianceDBS''). DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Page 12

Company Guide

Axiata Group

DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 13th Floor One Island East, 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 18 Westlands Road, Capital Square, Marina Bay Financial Centre Tower 3 Quarry Bay, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 3668 4181 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

THAILAND INDONESIA DBS Vickers Securities (Thailand) Co Ltd PT DBS Vickers Sekuritas (Indonesia) Contact: Chanpen Sirithanarattanakul Contact: Maynard Priajaya Arif 989 Siam Piwat Tower Building, DBS Bank Tower 9th, 14th-15th Floor Ciputra World 1, 32/F Rama 1 Road, Pathumwan, Jl. Prof. Dr. Satrio Kav. 3-5 Bangkok Thailand 10330 12940, Indonesia Tel. 66 2 857 7831 Tel: 62 21 3003 4900 Fax: 66 2 658 1269 Fax: 6221 3003 4943 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

Page 13