Analysts neutral on Axiata’s decision to cancel DRS
KUCHING: Axiata Group Bhd’s ( Axiata) decision to cancel the group’s dividend reinvestment scheme (DRS) has been met with neutral reactions, with analysts this as a logical move.
In a filing on Bursa Malaysia, it was announced that Axiata’s board had decided after careful deliberation, to exercise its right to cancel the application of the DRS on the electable portion of the interim dividend.
The statement also revealed that the entitled shareholders of Axiata will receive the entire interim dividend of RM0.05 per share in cash on November 12, 2018.
“We are neutral on Axiata’s decision to cancel its DRS on the electable portion of its interim dividend of five sen, which goes ex tomorrow ( today), due to the sharp drop in its share price,” AmInvestment Bank Bhd ( AmInvestment Bank) said.
According to AmInvesment Bank, Axiata had set the issue price for the group’s shares on September 27 under its DRS at RM4.26 per share, which represented an 8.8 per cent discount to the theoretical ex- dividend price of RM4.62 per share, based on the fiveday volume weighted average market price up to last trading day of September 26, prior to the price- fixing date.
“However, Axiata’s share price has since dropped by 25 per cent to RM3.48 per share currently, which is 18 per cent below the share exchange value for the dividends.
“Hence, we view Axiata’s board decision as logical given that its existing shareholders would not be opting for the DRS under the current conditions.”
Even though Axiata’s share price has been on a downward trajectory over the past months, the research firm remained optimistic on the group’s longer term fundamentals given improving revenue growth prospects for Celcom, XL, NCELL, Dialog and SMART.
“Furthermore, Axiata currently trades at a bargain financial year 2018 forecast ( FY18F) equity value ( EV)/ earnings before interest, depreciation and amortisation ( EBITDA) of six- fold, below its three- year average of sevenfold and half of Digi. Com Bhd’s 12- fold.”