KUALA LUMPUR (May 26): Axiata Group Bhd’s (KL:AXIATA) share price fell seven sen or 3.47% to close at its  intraday low of RM1.95 — its lowest level in 13 months — despite analysts raising earnings forecasts after the telco's quarterly earnings beat expectations.

Both Kenanga Research and MBSB Investment Bank said Axiata’s constant-currency Underlying Patami (CCUPatami) of RM438 million represented 80% of their annual forecasts.

Axiata posted a higher net profit of RM273.8 million for the first quarter ended March 31, 2026 (1QFY2026) versus RM159.8 million last year, despite marginally lower revenue.

The stock, which ended the session at RM1.95 after 31.34 million shares changed hands, gave the group a market capitalisation of RM17.92 billion. The stock has fallen 23% year to date.

Kenanga Research commented in its result review that Axiata’s CCUPatami growth was mainly driven by broad-based topline expansion across all operating companies, except for Link Net, and leaner costs.

The improved performance among the operating companies more than offset losses at Link Net and weaker associate contribution from the loss-making XLSmart, it added.

"The outperformance relative to our forecasts was primarily driven by lower-than-expected depreciation and finance costs," the research house said.

Kenanga raised its annual earnings by 69% while maintaining Ebitda estimates for the financial year ending Dec 31, 2026 (FY2026), but trimmed its sum-of-parts target price to RM2.05 from RM2.70.

The research outfit maintained its “market perform” rating on Axiata.

Meanwhile, MBSB Investment Bank revised downwards its assumptions for depreciation and amortisation, as well as net finance cost, leading to upward revisions in FY2026/2027/2028 earnings of 109.0%/75.1%/59.2%, respectively.

However, MBSB increased its discount to 35% from 30% "to account for the exclusion of Axiata from MSCI (Malaysia Index) [effective May 29] as well as slower-than-expected M&A (merger and acquisition) activities”, revising its target price to RM2.07 from RM2.21.

MBSB maintained a "neutral" rating on the stock.

Nonetheless, both research houses expressed concern over Axiata's Indonesian operations.

Kenanga believes "Axiata continues to face headwinds in Indonesia, impacted by elevated depreciation and financing costs at Link Net". MBSB echoed this, stating it is "concerned with the performance from XLSmart and LinkNet".

Additionally, Kenanga pointed out that XLSmart will likely incur significant near-term cash outflows to fund strategic capex, including 5G spectrum acquisition, which may limit the group's capacity to sustain dividend payouts.

According to AskEdge, Axiata is currently trading at a price-to-earnings ratio of 38.8 times, which is the highest among peers, but its price-to-book ratio of 0.9 times is the lowest among peers.