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RAM Ratings reaffirms BGSM Management’s AA3/Stable sukuk rating

Published on 31 Jan 2019.

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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.

 

Analytical contact
Ong Ju Laine 
(603) 7628 1183 
julaine@ram.com.my    

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad



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