Journey to Wealth
Axiata Bhd Raises USD1.5b via Sukuk Programme
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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