OSK XL AXIATA (TP Under Review – NEUTRAL) Corporate News Flash: Record Margin

XL Axiata (XL) reported its 1QFY10 results yesterday. The key highlights were :
· Revenue of IDR4.2tn, a 41% y-o-y and 3% q-o-q increase.
· Headline profit of IDR598bn, a reversal from the headline loss of IDR217bn in the previous corresponding quarter.
· EBITDA margin of 52% in 1QFY10 versus 38% in 1QFY09.


Under review. Our forecast, target price and NEUTRAL recommendation are under review pending the results conference call. Management’s latest guidance : (i) revenue growth of ‘at least higher teens’, (ii) EBITDA margin of ‘at least higher 40s’; and (iii) capex of ‘ IDR4-4.5tn’ are similar to the set of guidance offered post the release of its FY09 results in Feb’10. There is upside risk to our forecast considering that our EBITDA margin assumption of 44% for FY10 may have overstated the downside risk to margins over the ensuing quarters. The completion of the recent share placement exercise by its parent, Axiata Group (BUY, TP: RM4.26) should translate into improved share liquidity, a key share price re-rating catalyst.