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

Published on 07 Jan 2020.

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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 bil in nominal value (2013/2043). The reaffirmation of the rating is based on the well-established position of the Group’s ultimate subsidiary, Maxis Berhad (Maxis or the Company), in the Malaysian mobile services industry. The rating also considers the IMTN’s structural subordination to Maxis’ considerable priority debts. 

Despite challenging market conditions, Maxis remains Malaysia’s leading mobile operator, accounting for a respective 41.2% and 41.0% of the Big Three market incumbents’ revenue and operating profit before depreciation, interest and tax (OPBDIT) in 9M 2019. The Big Three refers to the major mobile network operators in Malaysia: Maxis, Digi and Celcom. Maxis still holds the pole position in the postpaid mobile segment, with a 37.5% share of subscribers. Its blended average revenue per user (ARPU) remained commendable at RM51 as at end-September 2019. 

That said, Maxis’ adjusted OPBDIT margin narrowed to 40.9% in 9M FY Dec 2019 (FY Dec 2018: 42.6%), largely attributable to the termination of its network-sharing agreement with U Mobile, heftier operating expenses for the expansion of its home fibre and enterprise business, lower regulated Mobile Termination Rates across the industry and the lower performance of its prepaid mobile business (albeit retaining the highest market share in terms of service revenue). Nevertheless, Maxis’ mobile prepaid revenue has remained stable over the past three quarters of fiscal 2019 with prepaid ARPU stabilising at RM35. 

As at end-fiscal 2018, the Group’s adjusted funds from operations debt coverage (FFODC) had thinned to 0.27 times (end-fiscal 2017: 0.32 times). This was due to its weaker financial performance and a slightly higher debt level of RM12.7 bil (end-fiscal 2017: RM12.4 bil). Even with RAM’s stressed scenario that assumes Maxis’ top line to record an average of 2% y-o-y drop and an OPBDIT margin of 40% with a prudent view on minimal growth on home fibre and enterprise business, the Group’s FFODC is envisaged to average 0.21 times over the next three years, albeit still within our rating threshold. While its adjusted gearing ratio stayed manageable at 0.37 times, its annualised net debt-to-EBITDA ratio of 2.88 times remained high. We note that Maxis has taken the initiative to introduce cost saving and optimisation measures to fund its new business growth, thus moderating the reliance on further debt financing for its capex needs.   

Moving forward, Maxis is anticipated to aggressively penetrate the home fibre and enterprise business segments, offering converged communication and digital solutions to drive growth while maintaining its core mobile business. As a first mover in the provision of converged solutions, Maxis is well poised to capture a larger market share in this currently under-penetrated segment. This is viewed favourably as it should help shore up the Company’s revenue and waning profits. Given the nascent stage of Maxis’ convergence strategy, however, we do not expect its revenue and profitability to see any immediate uptick in the near term.  


Analytical contact
Yip Chee Meng
(603) 3385 2516

Media contact
Padthma Subbiah
(603) 3385 2577


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.

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