KUALA LUMPUR (July 30): Axiata Group Bhd (KL:AXIATA) may still offer upside despite a sharp decline in its share price over the past three months, as investors have largely priced in concerns that its asset monetisation plans may not materialise, according to CGS International.

In a note on Thursday, the research house said Axiata’s share price decline was weighed by its removal from the MSCI Malaysia Index and concerns over delays in monetising its infrastructure assets, including telecom tower unit edotco Group Sdn Bhd and Indonesian broadband operator Link Net Tbk.

However, CGS International said its recent checks with management found no changes to the company’s guidance that it is targeting completion of the asset monetisation exercise this year.

The research house attributed the delay, particularly for the proposed disposal of edotco, to the complexity of the business, which operates across seven countries, as well as negotiations with potential buyers seeking to exclude certain assets from the transaction.

Importantly, CGS International said its earnings forecasts and Bloomberg consensus estimates do not factor in any gains from the proposed disposals, meaning any successful asset sales could provide additional upside.

It said Axiata’s current share price suggests investors have already largely discounted the possibility of the asset sales taking place.

The house estimated that the disposal of both edotco and Link Net could lift Axiata’s FY2027 core earnings per share by 12%. Meanwhile, the disposal of only loss-making Link Net could boost earnings by 29% by removing its drag on profitability.

Even if the edotco sale does not materialise, CGS International believes Axiata could still be valued based on its dividend yield.

"Assuming a 5% dividend yield target, Axiata would be valued at RM2.40 per share," it said.

That valuation could rise to RM3.03 per share if Link Net is sold and most of the incremental profits are returned to shareholders as dividends, it added.

At the time of writing, Axiata shares were down one sen or 0.5% at RM1.98, giving the company a market capitalisation of RM18.2 billion.

The company also continued to receive a largely positive outlook from research houses tracked by Bloomberg, with 13 "buy", seven "hold" and three "sell" recommendations. The average 12-month target price stood at RM2.71.

CGS International maintained its "add" rating on Axiata with a target price of RM2.87, saying any progress on the asset monetisation programme, including potential disposals of edotco or Link Net, could serve as a catalyst for a re-rating of the stock.