News Axiata, through its wholly owned subsidiary,
Axiata SPV2 Bhd, has established a multi-currency USD1.5b Sukuk Programme,
which had been assigned a rating of BBB- by S&P’s rating service.
The Sukuk Programme has an innovative structure, which among
others allows airtime vouchers to be included as a trust asset.
The Sukuk Programme is one of the capital management
initiatives being undertaken by the group to optimise its balance sheet and
improve its capital efficiency. The Sukuk proceeds are expected to be utilised
for general corporate purposes of the Axiata group or as may be otherwise
specified at the time of the relevant issue of each series.
For an illustrative purpose, assuming the maximum USD1.5b
(or RM4.8b) Susuk is issued as at 31 December 2011, the group’s gearing would
increase from 0.59x to 0.84x.
Comments While Axiata has no immediate funding
requirement, having the programme in place will allow the group to tap into the
international debt capital market and provide it flexibility in meeting its
funding requirements moving forward.
In view that the group is always committed to actively
managing its capital structure and optimising its balance sheet, we do not
discount the possibility that the group may potentially use certain Sukuk proceeds
for some capital initiative plans to maximise shareholder returns in future.
Should this scenario happen, this may provide a short-term re-rating catalyst
for the stock in our view.
Outlook The group’s outlook remains
challenging in our view judging from the persistent strong competition in both
its local and overseas ventures. Apart from heightening competition, regulation
issues in its key operating countries may continue to put barriers in its
operations going forward.
Nevertheless, the continuing strengthening of USD may
provide some currency translation gains to the group during the short term.
Forecast No changes in our FY12-FY14
earnings forecasts.
Rating Maintain MARKET PERFORM
Valuation Maintain MARKET PERFORM
We have raised our Target Price to RM6.25 (from RM5.95
previously) based on a higher targeted FY13 EV/forward EBITDA of 7.6x (+2SD vs.
+1.5SD previously).
Risks Regulation risks in its overseas ventures
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