Axiata shares fall on RM2.16bil tax bill news
NEWS that Axiata Group Bhd and its unit in Nepal were being slapped with a whopping tax bill of 61 billion Nepalese rupees (RM2.16bil) sent the former’s share price heading south.
The fall began Thursday afternoon soon after the Supreme Court of Nepal (SCN) ordered both Axiata and Ncell Pte Ltd to pay the taxes, including late fees and fines over the latter’s purchase by the former. The shares lost 34 sen in two days and closed yesterday at RM3.73, down nearly 5%.
The court order surprised many within the analyst fraternity, as they thought the case had been settled. However, it also brings to an end the long-drawn-out debate as to who should pay the fines.
Combined with the late fees and fines, Axiata would have to fork out about 66 billion rupees in total.
Both Kenanga Research and PublicInvest Research see the court order as a “negative surprise”.
JF Apex Securities in a note says it is looking at a possible earnings revision.
It added that if Axiata had to foot the bill, then it could register a net loss of RM770mil for financial year 2019 (FY19).
“We could potentially reduce our target price to RM4.71 a share from RM4.95 a share,” the research house says.
The Bloomberg consensus target price currently stands at RM4.48 a share.
Axiata is expected to announce its fourth-quarter 2018 (4Q18) results on Feb 22, and according to Bloomberg consensus, the net profit projections are RM706mil for 2018 and RM1.3bil for 2019.
Earnings before interest, taxes, depreciation and amortisation (Ebitda) for FY18 is expected to be RM8.7bil, with earnings per share at 0.07 sen.
How much of impairments Axiata needs to make for this year to fulfil the tax and fine obligations to Nepal may be announced on Feb 22 or sooner.
As it is, Axiata in a statement says “none of the Axiata parties to the litigation have received the judgment and order of the Supreme Court following its ruling, nor does the group have any details of what was ordered by the Supreme Court”.
It will make the appropriate announcements when it gets to digest what the court order means for the group, and Ncell.
The whole issue of the tax bill began after Axiata bought an 80% stake in Ncell way back in 2015. Ncell is Nepal’s second-largest mobile player, while Axiata is a regional mobile company with stakes in mobile companies across the region, namely, Indonesia (XL), Cambodia (Smart), Bangladesh (Robi), Sri Lanka (Dialog), Singapore (M1) and India (Idea). Locally, it controls Celcom Axiata Bhd besides the 80% stake in Ncell.
Axiata bought the stake from Reynolds Holdings, which was majority owned by TeliaSonera of Norway, for US$1.365bil.
The tax issue was hugely debated only after TeliaSonera exited Nepal - it was about who should pay the tax, the buyer or seller.
Kenanga Research writes that