24 July 2012
Summary of Analyst Report: Axiata Group Bhd, target price RM 5.71, Neutral - CIMB Research
Axiata announced last Thursday it has established a multi-currency sukuk programme that enabled it to raise up to US$1.5bil or the equivalent in other currencies based on prevailing interest rates when funding needs arise.
The funds would be used for “general corporate purposes”.
It has obtained central bank and regulatory approvals.
The programme allows airtime vouchers, which represent an entitlement to a specified number of on-network calls on its subsidiaries, to be included as a trust asset.
We understand this helps to lower the financing cost.
We view Axiata's establishment of a sukuk programme positively as it allows the group to raise funds quickly when the need arises.
While there is no immediate need, the facility allows Axiata to raise up to US$1.5bil or the equivalent in other currencies.
With this programme in place, Axiata can raise funds within weeks, saving about two months of regulatory approvals and credit rating.
We also believe this is not a prelude to a special dividend payout.
Axiata remains a neutral with unchanged forecasts and sum of parts-based target price.
While there are no imminent merger and acquisition deals on the table, we believe Axiata remains interested in strengthening its position by being a consolidator in Bangladesh and India.
We also gather that Axiata is keen to take control of India's Idea Cellular in which it currently owns 19.3%, if the opportunity emerges.
However, we do not expect Axiata to make any significant moves in India until the regulatory issues clear up.
Other investment opportunities include Myanmar, in our view.
Switch from Axiata to Telekom Malaysia for growth or StarHub for dividend yields.
Axiata's share price has run up significantly in recent weeks, possibly due to a flight to quality and dividend-yielding stocks.