RAM reaffirms BGSM’s AA3/Stable sukuk rating
KUALA LUMPUR: RAM Ratings has reaffirmed the AA3/Stable rating of BGSM Management Sdn Bhd’s (BGSM Management) IMTN Programme of up to RM10 billion in nominal value (2013/2043).
The reaffirmation of the rating is based on the wellestablished position of the group’s ultimate subsidiary, Maxis Bhd (Maxis), in the Malaysian mobile services industry. The rating also considers the IMTN’s structural subordination to Maxis’ considerable priority debts.
“Despite challenging market conditions, Maxis remains Malaysia’s leading mobile operator, accounting for a respective 41.2 and 41 per cent of the Big Three market incumbents’ revenue and operating profit before depreciation, interest and tax (OPBDIT) in the first nine months of finnacial year 2019 (9MFY19),” RAM said in a statement yesterday.
The Big Three refers to the major mobile network operators in Malaysia: Maxis, Digi and Celcom.
Maxis still holds the pole position in the postpaid mobile segment, with a 37.5 per cent share of subscribers. Its blended average revenue per user (ARPU) remained commendable at RM51 as at end-September 2019.
“That said, Maxis’ adjusted OPBDIT margin narrowed to 40.9 per cent in 9MFY19, largely a ributable to the termination of its networksharing agreement with U Mobile, he ier operating expenses for the expansion of its home fibre and enterprise business, lower regulated Mobile Termination Rates across the industry and the lower performance of its prepaid mobile business.
“Nevertheless, Maxis’ mobile prepaid revenue has remained stable over the past three quarters of fiscal 2019 with prepaid ARPU stabilising at RM35.”
As at end-fiscal 2018, the group’s adjusted funds from operations debt coverage (FFODC) had thinned to 0.27 times. This was due to its weaker financial performance and a slightly higher debt level of RM12.7 billion.
Even with RAM’s stressed scenario that assumes Maxis’ top line to record an average of two per cent y-o-y drop and an OPBDIT margin of 40 per cent with a prudent view on minimal growth on home fibre and enterprise business, the group’s FFODC is envisaged to average 0.21 times over the next three years, albeit still within its rating threshold.
“While its adjusted gearing ratio stayed manageable at 0.37 times, its annualised net debt-to-EBITDA ratio of 2.88 times remained high,” it forewarned.
RAM noted that Maxis has taken the initiative to introduce cost saving and optimisation measures to fund its new business growth, thus moderating the reliance on further debt financing for its capex needs.
“Moving forward, Maxis is anticipated to aggressively penetrate the home fibre and enterprise business segments, offering converged communication and digital solutions to drive growth while maintaining its core mobile business.
“As a first mover in the provision of converged solutions, Maxis is well poised to capture a larger market share in this currently underpenetrated segment.
“This is viewed favourably as it should help shore up the Company’s revenue and waning profits. Given the nascent stage of Maxis’ convergence strategy, however, we do not expect its revenue and profitability to see any immediate uptick in the near term.”
It was a good start of the week for Bursa as foreign funds snapped up RM42.9 million net of local equities on Monday.
MIDF Research