XL
Axiata (FV IDR7200 – BUY) Corporate News Flash: Etisalat
Hangs Up on XL
According to media reports, Etisalat has disposed of a 9% stake, or
775m shares, in XL Axiata (XL) by way of block trade. The shares were priced at
IDR6100-IDR6300 apiece, at a 9% discount to the stock’s last closing price of
IDR6700. The sale netted proceeds amounting to USD502m. JP Morgan and Morgan
Stanley managed the share sale.
Some overhang expected.
The sale follows reports
earlier this year that Etisalat intends to exit the telco, citing differences
with XL’s controlling shareholder, Axiata Group, which owns 66.5% of XL.
Following the disposal, Etisalat’s stake has been diluted to 4.2% from 13.3%.
The group’s timing could not have been better as XL’s share price has hit a new
record, outperforming the JCI and its peers YTD. The Middle Eastern group first
acquired a 16% stake in XL for USD428m but saw its shareholding water down to
13.3% as it did not take up the rights shares offered by XL in 2009.
Positive in boosting share
liquidity. While some overhang is to be
expected in the short term, we view the disposal positively as it will improve
XL’s public shareholding spread from 20.2% currently to 29.3%. We expect
Etisalat to relinquish its remaining 4.2% stake in the telco after the three
months’ lock-up period, thus boosting the free float further to 33.5%. XL stands
to benefit from a 1% reduction in corporate tax should its public spread rise to
40%, which we think could easily be achieved via a placement exercise by Axiata
Group.
Maintain BUY, based on a FV of
IDR7200. XL remains our top pick for
exposure to the Indonesian telco sector for its superior growth and execution
track record. We expect the company to continue to take revenue share away from
Telkomsel and Indosat, with its FY12 revenue growth likely to surpass the
projected industry’s of 5%-7% in 2012.
source: OSK dated 13 September 2012
