Company Highlights
- XL Axiata (EXCL IJ): A leading telecommunications company in Indonesia.
- Bermaz Auto (BAUTO MK): A significant player in the automotive industry, distributing Mazda vehicles in Malaysia and the Philippines.
- ComfortDelGro Corporation (CD SP): A major land transport services provider, including bus, taxi, and rail services, based in Singapore.
Investment Recommendation
We recommend BUY for all three companies based on strong growth potential, attractive valuations, and promising developments in their respective sectors.
Investment Thesis
XL Axiata: With a significant planned acquisition of ServeCo, XL Axiata’s fixed broadband subscriber base is expected to rise by 279%, boosting average revenue per user (ARPU) by 10%. Strong net profit growth of 45% is anticipated for 2024 due to its expanding subscriber base and revenue streams. XL Axiata’s growing market position in Indonesia’s fixed broadband industry solidifies its strong future outlook.
Bermaz Auto: Bermaz Auto’s current valuation presents an excellent buying opportunity with a forward PE of 9.6x FY25 earnings and an 8% dividend yield. Despite a challenging outlook due to competitive pressures from new models, its strategic focus on electric vehicles (EVs) and a strong pipeline of new Mazda launches enhance its prospects. We expect the company to continue delivering stable growth with steady dividend payouts.
ComfortDelGro: ComfortDelGro is set to benefit from an increase in public transport fares in Singapore, alongside the recent awarding of new bus contracts in Australia, which is expected to grow the company’s bus fleet in Melbourne by 30%. However, despite these developments, competition in the ride-hailing sector poses a risk. We maintain a cautious HOLD on ComfortDelGro due to its limited near-term upside.
Detailed Company Analysis
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XL Axiata (EXCL IJ)
- Financial Results: XL Axiata reported a 168% year-on-year growth in net profit for Q1 2024, driven by its strong mobile and fixed broadband subscriber growth. Its ARPU is set to rise with the acquisition of ServeCo, enhancing its revenue base.
- Stock Impact: The acquisition will strengthen its position in the Indonesian broadband market, making it a competitive number two in the sector.
- Earnings Revisions/Risks: While no significant earnings revisions are anticipated, downside risks include intensifying competition and macroeconomic factors.
- Valuation: Target Price: Rp2,900, representing a 27.8% upside. The stock trades at a favorable 2024 EV/EBITDA ratio of 4.1x.
- Price Catalysts: Successful acquisition of ServeCo, along with continued ARPU growth and subscriber expansion.
- Recommendation Date: September 12, 2024
- Stop Loss: Not mentioned.
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Bermaz Auto (BAUTO MK)
- Financial Results: Bermaz Auto’s Q1 FY25 results were in line with expectations, despite a 22.2% decline in core PATMI due to increased competition. However, its attractive valuation of 9.6x FY25F PE and a strong dividend yield of 8% makes it a compelling buy.
- Stock Impact: Although facing strong market competition, Bermaz Auto’s introduction of the XPeng brand in Malaysia and its solid dividend policy underpin its future growth.
- Earnings Revisions/Risks: We have revised earnings forecasts downward by 10-13% for FY25-27 due to increased competition from other brands.
- Valuation: Target Price: RM2.90, offering a 22% upside. The company’s earnings are well-supported by consistent sales and a healthy dividend yield.
- Price Catalysts: New vehicle launches, continued strong dividend yields, and market penetration in the EV segment.
- Recommendation Date: September 12, 2024
- Stop Loss: Not mentioned.
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ComfortDelGro Corporation (CD SP)
- Financial Results: ComfortDelGro reported steady performance with a 5.7% increase in share price YTD, supported by new bus contracts in Australia and fare hikes in Singapore. The company’s balance sheet remains strong, and its diversification into international markets continues to bolster earnings.
- Stock Impact: The fare hikes and new contracts are expected to boost revenue, though competition in the taxi and ride-hailing sectors remains a challenge.
- Earnings Revisions/Risks: No major revisions were made, though earnings could be pressured by increasing competition in ride-hailing.
- Valuation: Target Price: S$1.56, representing a modest 5.4% upside. The stock offers a stable dividend yield of 4.9%.
- Price Catalysts: Successful integration of new contracts in Australia, public transport fare hikes in Singapore.
- Recommendation Date: September 12, 2024
- Stop Loss: Not mentioned.
Financial Targets
- XL Axiata: Target Price: Rp2,900, Upside: +27.8%
- Bermaz Auto: Target Price: RM2.90, Upside: +22%
- ComfortDelGro: Target Price: S$1.56, Upside: +5.4%
Broker Information
This report was originally issued by UOB Kay Hian, dated September 12, 2024.
