KUALA LUMPUR, Dec 25 – Moody’s Investors Service has affirmed Axiata Group Bhd’s Baa2 issuer rating with a stable outlook after its recent acquisition in Nepal. Moody’s has also affirmed the Baa2 rating on the senior unsecured debt issued by Axiata SPV1 (Labuan) Ltd, as well as, the Baa2 rating on the US$500 million sukuk notes and the provisional (P)Baa2 rating to its sukuk issuance programme established by Axiata SPV2 Bhd.
Among the rationale for the rating is that although the recent 80 per cent acquisition of Nepal’s Ncell Pvt Ltd would slightly expand the firm’s leverage it would allow Axiata to expand its regional footprint. Moody’s Vice-President and Senior Analyst Gloria Tsuen in a statement here said they believe this is an opportunistic acquisition in an under penetrated smartphone and broadband market.
“Although there are some risks associated with Nepal’s evolving regulatory environment and repatriation of cash, Axiata has some financial flexibility to absorb these challenges within its ratings level,” said Moody’s Vice-President and Senior Analyst Gloria Tsuen in a statement.
Moody’s expects Axiata’s revenue for 2015-2016 to grow by low-to-mid single digit percentages, supported by stabilisation and recovery in Celcom and XL, as well as, continued solid growth at Robi Axiata Ltd (unrated) in Bangladesh and Dialog Axiata PLC (unrated) in Sri Lanka.
Moody’s also expected Axiata’s cash flow to remain strained in the next one to two years, driven by the company’s progressive dividend payout ratio and elevated capital expenditure which was expected to remain around RM5 billion and RM6 billion in the next two years, as the company invests to upgrade its network.
However, its stable earnings from diversified revenue sources, solid market positions and strong relationships with the Malaysian government (A3 positive), would continue to support its rating. The stable outlook reflected Moody’s expectation that Axiata would maintain its solid operating and financial profile, given the stable cash flow from Celcom and higher dividend contribution from its international subsidiaries over the medium-term.
