We set our target price at RM2.04 using a sum-of-the-parts (SOTP) based valuation methodology of Axiata’s various subsidiaries and associates. We use a mix of methodologies to value these associates and subsidiaries, with our covered names utilizing their DCF-based target prices, while the majority-owned businesses primarily use an EV/EBITDA to 3-year EBITDA CAGR ratio of 1x. We apply a 15% holding company discount to its listed parts valuation to reflect that investors can opt to buy these directly. At our target price, Axiata would trade 4x EV/EBITDA for FY25E.

Downside risks to our investment case that could prevent the shares from reaching our target price include: 1) competitive intensity leading to lower data monetization and significant postpaid subsidy escalation in any of its wireless markets of operation; or 2) pricing and/or regulatory pressure on the wireless business. Upside to our outlook could come from: 1) value crystallization of its unlisted parts at valuations higher than our base case; or 2) currency strength in its overseas subsidiaries and associates.