UBS revised its view on XL Axiata Tbk, upgrading the Indonesian telecommunications operator from Sell to Neutral and reducing its price target to IDR3,300 from IDR3,600. The broker noted valuation dynamics and the company s profit trajectory as central to its reassessment.
XL Axiata currently yields 3.4% in dividends and has maintained distributions for six consecutive years, providing income continuity for shareholders. The stock experienced a 36% drop following MSCI's review of Indonesian equities and, according to UBS, now trades at 5x 2027E EV/EBITDA - a level described as one standard deviation above its five-year mean. UBS also reports a current EV/EBITDA of 9.96x and a beta of -0.19, indicating the stock has tended to move inversely to broader market swings.
On the operational front, UBS highlighted favorable pricing dynamics in the market. It pointed to better-than-expected ARPU performance in the fourth quarter, with both Indosat and XL delivering more than 10% quarter-over-quarter growth in ARPU. These pricing trends contrast with some investor concerns about profitability.
Revenue growth was noted at 23.42%, yet consensus forecasts have been revised downwards and now imply that losses could persist into 2026. This view aligns with data showing XL Axiata was not profitable over the most recent twelve-month period, as reported through market data services referenced by UBS.
Given the current picture, UBS expects the shares to trade in a sideways pattern - a dynamic the bank compares to Indosat's behaviour in 2022 - unless there is clearer evidence that merger-related synergies will produce an inflection in earnings growth. On balance, the firm judges the stock's risk-reward profile to be balanced at present.
Context and implications
The upgrade to Neutral reflects UBS s view that valuation and operational signals are offsetting: stronger ARPU progression and steady dividend policy versus stretched EV/EBITDA and ongoing consensus expectations of losses. For investors, the broker's guidance implies limited near-term upside without demonstrable merger benefits or improved profitability metrics.