Published on 31 Jan 2019.
RAM Ratings has reaffirmed the AA3/Stable rating of BGSM Management Sdn Bhd’s (the Group) IMTN Programme of up to RM10 billion in nominal value (2013/2043). The reaffirmation of the rating is based on the well-established market position of the Group’s ultimate sole subsidiary, Maxis Berhad (Maxis), in the Malaysian mobile services industry. The rating also takes into account the IMTN’s structural subordination to Maxis’ considerable priority debts.
Maxis has maintained its strong leadership position in the industry. It accounted for a respective 39.6% and 44.0% of the market’s revenue and operating profit before depreciation, interest and tax (OPBDIT) in 9M FY Dec 2018. Maxis also leads the postpaid mobile segment, with a 35.6% share of its subscribers while maintaining its blended average revenue per user (ARPU) at RM53 – the highest in the industry ¬– as at end-3Q 2018. On the other hand, its adjusted OPBDIT margin narrowed to 46.4% (post-MFRS 15) in 9M FY Dec 2018 (FY Dec 2017: 48.2%), mainly due to the weaker showing of its prepaid mobile segment as a result of a shrinking subscriber base.
At group level, BGSM Management’s funds from operations debt coverage stood at 0.35 times as at end-fiscal 2017, thanks to its better-than-anticipated financial performance and a lower debt level. Taking into account the imminent 700 MHz spectrum fees and the competitive operating landscape, the Group’s debt coverage is envisaged to weaken slightly to 0.24 times between 2019 and 2021, albeit still healthy and well within our rating threshold. Its overall adjusted debt stood at a considerable RM12.5 billion as at end-September 2018 (end-2017: RM12.4 billion). Any additional debt-funded capex and persistently keen competition, along with the possibility of a reallocation or tender for other spectrums in the foreseeable future, may exert pressure on the Group’s credit profile.
Ong Ju Laine
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Ratings on BGSM Management Sdn Bhd