KUALA LUMPUR: 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 ratings agency said on Tuesday, April 12 the proposed buyback, equivalent to 844.515 million shares, is subject to shareholder approval. The purchase will be funded out of surplus internal cash sources, after taking into consideration capex and working capital requirements throughout the Group.
"Assuming the full amount of the shares are purchased, at today's share price, the cost would be approximately RM4.0 billion, compared to consolidated cash holdings of RM6.3 billion (RM5.9 billion at holdco level plus Celcom) as at Dec 31, 2010," says Laura Acres, a Moody's Vice President and Senior Credit Officer.
"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," says Acres, also Moody's Lead Analyst for Axiata.
The principal methodology used in this rating was Global Telecommunications Industry published in December 2010.
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 MALAYSIA BHD [] (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.
The ratings agency said on Tuesday, April 12 the proposed buyback, equivalent to 844.515 million shares, is subject to shareholder approval. The purchase will be funded out of surplus internal cash sources, after taking into consideration capex and working capital requirements throughout the Group.
"Assuming the full amount of the shares are purchased, at today's share price, the cost would be approximately RM4.0 billion, compared to consolidated cash holdings of RM6.3 billion (RM5.9 billion at holdco level plus Celcom) as at Dec 31, 2010," says Laura Acres, a Moody's Vice President and Senior Credit Officer.
"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," says Acres, also Moody's Lead Analyst for Axiata.
The principal methodology used in this rating was Global Telecommunications Industry published in December 2010.
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 MALAYSIA BHD [] (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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