KUALA LUMPUR (Feb 10): Analysts say Axiata Group Bhd (KL:AXIATA) is on track to achieve at least a 10% dividend growth from FY2026 and reduce debt through normal operations, even though asset sales are taking longer than expected.

Under its Axiata28 plan, the group has sharpened its financial targets to include a net debt-to-earnings before interest tax depreciation and amortisation (Ebitda) ratio of below 2.0 times, signalling a shift from balance sheet repair towards sustainable value delivery.

The improved outlook is supported by deeper post-merger synergies across Malaysia, Indonesia and Sri Lanka, a better macro environment in Bangladesh, upside from 5G monetisation and ongoing price recovery in Indonesia, Sri Lanka and Bangladesh.

BIMB Securities said that at its investor day event, Axiata highlighted a strategic shift from multi-year balance sheet repair and management of geopolitical shocks to disciplined value realisation.

Management noted that 2023-2024 was a trough period, affected by Sri Lanka’s currency depreciation and Bangladesh’s political turmoil. With macro conditions stabilising, the group is aiming for steady performance by 2027, driven by operational delivery, synergy capture and more predictable dividends without relying on aggressive asset sales.

It said Axiata is maintaining balance sheet discipline to provide flexibility to reinvest in technology, fund synergies and support sustainable dividend growth from 2026 onwards. The group is also simplifying its portfolio, focusing on five core telcos plus technology platforms.

In Malaysia, where consolidation is limited, management is emphasising value extraction from regional scale rather than domestic exits, addressing long-standing complexity through a narrower strategic focus and disciplined capital allocation.

BIMB Securities said Axiata’s dividend was stable at 10 sen for FY2023 and FY2024, with the same expected for FY2025. Management guidance suggests a rise to 11 sen in FY2026 and 12.1 sen in FY2027, higher than the previous assumption of a flat 10 sen. It said at the current share price, this implies an attractive dividend yield of 5.0-5.5%.

According to BIMB Securities, a key driver is Indonesia’s XL-Smartfren merger, the group’s most important earnings and valuation catalyst. The combined entity, XLSmart, operates 67,000 sites, has completed about 73% of network integration, and holds roughly 152MHz of spectrum. The group now has clear brand positioning, with XL as a premium brand, Axis targeting youth and Smartfren serving the mass blue-collar segment.

Market conditions are already improving, with revenue up 4-5% since 2Q2025 and significant room for average revenue per user growth of up to 50%. Management expects US$300 million (RM1.1 billion) in synergies by 2026, with full benefits realised by 2027, making XLSmart the main contributor to higher upstream dividends. BIMB Securities added that these synergies should translate into stronger cash remittances to the holding company from 2026, supported by steady cash generation in Cambodia and improving conditions in Bangladesh and Sri Lanka.

RHB Research noted that Axiata expects to complete the divestment of Edotco in FY2026, but cautioned that investor concerns over Indonesia could complicate the sale of its 73.5%-owned Link Net, which recorded an impairment of about RM400 million in 9M2025. Over the medium term, the group is targeting small acquisitions in cyber security and artificial intelligence to drive technology-led growth. Its digital businesses are also progressing towards value creation, with Boost expected to turn Ebitda-positive by end-2026.

Axiata added that it is not in talks to acquire Telenor Group’s 33.1% stake in CelcomDigi, as Telenor plans to refocus on its core Nordic markets.

RHB Research said potential asset sales involving Edotco or Link Net are viewed as upside rather than necessary to support dividends, while CGS International highlighted that rising upstream dividends, lower financing and central operating costs would free up more cash for shareholders. With leverage declining, CGS International believes dividend growth is becoming structurally sustainable rather than dependent on asset sales.

Most analysts have maintained a “buy” call on Axiata, with an average 12-month target price of RM2.92. As at noon break, the stock closed at RM2.37 a share, giving the group a market value of RM21.77 billion.