PETALING JAYA: The impact of Axiata Group Bhd’s trimming its stake in Indonesia-listed XL Axiata (XL) is expected to be minimal.

       The mobile telecommunications company will still own a controlling stake in XL once the deal is completed.

       Axiata had on Monday announced it would dispose of 533.4 million shares, representing a 5% equity interest, in XL to Ferrymount Investments (FIL) for 1,440 billion rupiah (RM423.5mil) or 2,700 rupiah (79 sen) per share.

       Axiata owns a 66.5% stake in XL.

       PublicInvest Research said, in its report, that its projected core earnings and sum-of-parts-based valuation for Axiata are not expected to be materially affected by the proposed disposal.

       “Following the disposal, our sum-of-parts-based target is estimated to reduce by about 1.2% while the impact to core profit is expected to be immaterial,” it said in its report yesterday.The brokerage noted although Axiata would raise some RM423.5mil from the exercise, it expected much of the proceeds would be reinvested into developing the Malaysian telecommunication infrastructure network.

       PublicInvest Research maintained its “neutral” call on Axiata, with an unchanged target price of RM4.

       For the six months to June 2021, the Indonesian market contributed to about 30% of Axiata’s group revenue and 36% of earnings.

       FIL is a company incorporated under the laws of the British Virgin Islands, with Procap Partners Ltd and George Raymond Zage III (founder of Tiga Investments Pte Ltd) indirectly hold two-thirds and one-third of the issued and outstanding share capital of FIL, respectively.

       In its filing with the stock exchange, Axiata said the disposal of a 5% stake in XL would facilitate the timely introduction of Indonesia-focused investors in XL who acknowledge the value and opportunities in the domestic telecommunications sector.

       “The principals of Procap and Tiga Investments have extensive knowledge, experience, business partnerships, and investments in Indonesia, as well as in global capital markets,” it said.

       “Axiata is of the view that the disposal, which provides XL with access to the aforesaid business partnerships of Procap and Tiga Investments, among others, will place XL in a better operational footing in the near future,” it added.

       At the same time, Procap and Tiga Investment’s linkages to the Indonesian digital ecosystem would enable XL to engage and further develop its digital and value-added services to offer its current base of about 58 million customers, thereby improving the user experience, Axiata said.

       The stake disposal is expected to be completed next month, it noted.