Maxis to declare special dividend?

The Maxis Bhd’s board of directors will discuss the possibility of declaring a special dividend payout, sources said.

KUALA LUMPUR: Maxis Bhd’s board of directors will discuss the possibility of declaring a special dividend payout at their routine directors meeting which is usually held at the end of every month, sources familiar with the matter said.

“This will be tabled for discussions by the board and from what I gather, the CFO (chief financial officer), Nasution Mohamed, will present to the directors the financial health and cashflow situation to the directors first before any decision is made,” a source told Starbiz yesterday on condition of anonymity.

“This is what I will tell you for now, but I cannot say how the discussions will turn out. Please understand this,” the source said when asked of the possibility on whether the dividend will eventually be declared or not.

Another source who sits on the board of Maxis, confirmed the possibility of it eventually declaring a special dividend payout after it secured approval on Monday from the Securities Commission for the proposed 10-year sukuk issuance amounting to Rm2.45bil.

“We need time to discuss this and think through this properly first, and we shall inform our shareholders through proper channels should there be anything,” the internal source added.

It is learnt that a number of shareholders, especially institutional ones, had questioned the rationale of the sukuk exercise and that these concerned shareholders hadhighlighted that the announcement to Bursa Malaysia did not give enough details of what Maxis intended to do with the funds raised from the debt market.

An industry observer pointed out that refinancing debt with more debt could ultimately erode shareholders interest in the company and concerns of a healthy dividend payout would concern shareholders.

It is noteworthy that almost 60% (Rm1.45bil) of the money raised from this sukuk issuance will be used to refinance existing loans, the announcement by Maxis stated. The remainder of Rm1bil that is raised from the debt market could be used for capital expenditure, working capital, general funding requirements or general corporate purposes, it added.

“The sukuk issuance will ultimately lead to an indirect dilution of shareholders interest and the announcement by Maxis had also highlighted the increase of its gearing as a result of this,” an observer said.

“The consolidated gearing of Maxis will increase from 0.63 times to 0.75 times (on proforma basis, based on 2010 audited accounts),” Maxis told Bursa.

Analysts are mostly neutral on Maxis, according to Bloomberg data. Twenty of 30 analysts (67%) covering the stock had a hold rating on Maxis while only six had buy calls and another four research houses rated the stock a sell.

“The Rm2.45bil Sukuk issuance will raise Maxis’ net debt over its earnings before interest, taxes depreciations and amortisation from 1.1 times to 1.7 times and net gearing from 0.6 times to 1 times,” OSK Research’s analyst Jeffrey Tan said in a report issued last week.

Maxis’ was among the top the gainers in yesterday’s trading session, surging 17 sen to RM5.98 at its close.