Friday, April 22, 2011

Axiata ... Apr11

Axiata Group Bhd is seeking the approval from its shareholders to buy back its own shares of up to 10% of its issued and paid-up share capital at the forthcoming AGM.

It also proposed to exempt Khazanah Nasional Bhd from the obligation to undertake a mandatory takeover offer on the remaining shares it did not already own in Axiata upon the latter’s purchase of its own shares. Khazanah holds 41.3% stake in Axiata. Future purchases by Axiata of its own shares pursuant to the proposed share buy-back could increase Khazanah’s shareholding in Axiata by more than 2% in any six-month period.

As a result, Khazanah would trigger an obligation to undertake a mandatory takeover offer on the remaining voting shares in Axiata. Causing Khazanah to trigger a mandatory takeover obligation is not the objective of the proposed share buy back,

Meanwhile Moody's Investors Service sees no impact for the Baa2 issuer rating and senior unsecured bond rating of Axiata Group Bhd following its proposal to buy back up to 10% of its own shares. The outlook remains positive.

The purchase will be funded out of surplus internal cash sources, after taking into consideration capex and working capital requirements throughout the Group. The cost would be approximately RM4.0 billion based on 12 April 2011, compared to consolidated cash holdings of RM6.3 billion (RM5.9 billion at holding co level plus Celcom) as at Dec 31, 2010.

While the purchase will adversely affect retained cash flow metrics, Moody's believes that this can be accommodated within the Baa2 rating given Axiata's relatively strong financial metrics and moderate leverage, as measured by adjusted consolidated debt/EBITDA of 1.7 times.

Moody's notes that shareholder approval for the buyback does not impose any obligation on Axiata to execute fully on the mandate. However, while Moody's anticipates this to be a one-off event, the agency cautions that further shareholder returns over and above standard dividend payouts may have adverse consequences for the rating or the positive outlook, particularly if retained cash flow is pressured over a sustained period.

The last rating action on Axiata was on 6th December 2010 when Moody's changed the outlook on Axiata's ratings from stable to positive.

Axiata is one of Southeast Asia's largest regional cellular telecommunications providers with approximately 159.7 million subscribers. Key investments include Celcom in Malaysia (wholly owned); XL in Indonesia (66.7% stake); Dialog in Sri Lanka (85% stake); Hello Axiata Ltd in Cambodia (wholly owned); and Robi in Bangladesh (70% stake) as well as a 29.49% stake in M1 in Singapore and 19.1% in Idea in India.

Axiata was demerged from Telekom (rated A3/stable) in April 2008. Axiata is 62.62% directly owned by government of Malaysia related entities including a 41.3% stake held by Khazanah Nasional Bhd.

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