Making Sense of Axiata Group Bhd From An Investor’s Perspective

Axiata Group Bhd (KLSE: 6888.KL) is a telecommunications group listed in Bursa Malaysia, Malaysia’s stock market.

It is a big company with its market capitalisation of RM47.5 billion (around S$15.7 billion). Its telecommunications business interests extend to nine countries across Asia, which include Malaysia, Indonesia, India, and Singapore.

Interestingly, the company’s Singapore operations stem from its 28.3% ownership (as of 25 February 2016) in the Garden City’s smallest telco, M1 Ltd (SGX: B2F).

Axiata’s size and regional reach may also remind investors of Singapore Telecommunications Limited (SGX: Z74), Singapore’s largest telco. Singtel has stakes in a number of telcos across Asia, including those in the Philippines, Indonesia, Thailand, and more.

Let’s look at some aspects of Axiata’s business performance over its last five completed fiscal years to gain a better understanding of the company.

From 2011 to 2015, Axiata has seen its revenue grow by 4.3% annually from RM16.29 billion to RM19.88 billion. The company’s revenue growth has been accompanied by a 7.5% compound annual increase in its subscriber numbers, from 199 million to 275 million.

In a similar manner to its revenue, Axiata’s profit after tax and minority interests had inched up by 1.6% per year from RM2.35 billion in 2011 to RM2.55 billion in 2015.

We have seen that Axiata has seen some growth in both its top-line and bottom-line in recent years. Let’s now turn to the company’s return on invested capital (ROIC) to get a better understanding on the return that it generates on its capital.

Over the past five years from 2011 to 2015, Axiata’s ROIC has been on a downtrend, declining in each year from 12.1% to 7.7%. Five years ago in 2011, Axiata could generate 12.1 cents in profit for every dollar of capital invested in its business; this has decreased to 7.7 cents in 2015.

Apart from the drop in its ROIC, Axiata’s total borrowings have also increased from RM11.5 billion in 2011 to RM16.4 billion in 2015. This has caused the company’s gross debt to EBITDA (earnings before interest, taxes, depreciation, and amortisation) ratio to increase from 1.6 to 2.3 over the same period.

There are both positives (the company’s revenue, profit, and subscriber growth) and negatives (the lower ROIC and higher gross debt to EBITDA) about Axiata highlighted here. Investors should use these information only as a useful starting point for further research.

To keep up to date on the latest with the world of finance and for more investing insights, you can sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay does not own shares in any companies mentioned.