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

Published on 20 Jan 2023.

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RAM Ratings has reaffirmed the AA3/Stable rating of BGSM Management Sdn Bhd’s (the Group) Islamic Medium-Term Notes (IMTN) Programme of up to RM10 bil in nominal value (2013/2043). 

The rating is premised on the formidable business position of the Group’s indirect subsidiary, Maxis Berhad (the Company), in the Malaysian telecommunications industry. We also factored in the IMTN’s structural subordination to Maxis’ considerable priority debts. 

As the leading converged solutions company, Maxis held the largest mobile subscriber base of 11.7 mil as at end-September 2022 (end-September 2021: 11.4 mil). The Company also retained the largest share of the Big Three’s (Maxis, Digi and Celcom) collective revenue (42.9%) and operating profit before depreciation, interest and tax (OPBDIT) (39.5%) in 9M 2022. Its consumer fibre and enterprise segments continued to gain traction, growing a respective 19.9% and 5.0% y-o-y to 555,000 connections and 90,000 enterprise business accounts during the same period.

In 9M FY Dec 2022, Maxis’ topline rose 6.6% y-o-y to RM7.2 bil on the back of a strong customer base. Weighed down by higher device costs, a measured investment to lock-in customers to its 2-year and 3-year handset and associated service commitments, however, its OPBDIT was largely unchanged from the same period last year. This came on the heels of steady OPBDIT growth of 1.9% y-o-y to RM3.6 bil in FY Dec 2021 against a revenue base of RM9.2 bil (+2.3% y-o-y).

While the prepaid mobile business contracted following successful prepaid to postpaid migration, consistent growth across all segments over the past year underpinned Maxis’ financial performance. Continuous expansion of enterprise converged revenue was supported by internal capabilities and acquisitions that allowed the Company to offer a suite of information and communications technology solutions. This kept BGSM Management’s financial performance resilient on a consolidated level. The Group’s funds from operations debt coverage (FFODC) remained stable at 0.29 times in FY Dec 2021 (FY Dec 2020: 0.30 times).  

Maxis’ leadership position will be disrupted by the emergence of Celcom Digi Berhad. As the latter’s merger synergies (including the formation of a single corporate brand) will take time to materialise, we believe Maxis will continue to move beyond connectivity, where expanding converged solutions will be crucial for future growth. As such, we do not foresee immediate stresses to its business. Collectively, enterprise services and home fibre grew from constituting 5% of the Company’s total service revenue in 2015 to accounting for 15% in 9M FY Dec 2022. As a first mover in the converged solutions space, Maxis is well poised to capture a larger market share in this currently underpenetrated segment. 

Where its peers signed 10-year access agreements with Digital Nasional Berhad (DNB) on 30 October 2022, Maxis is still awaiting shareholders’ approval, expected to be obtained shortly. We believe the delay of a few months will not materially affect the Company’s 5G rollout, given the still nascent 5G ecosystem in Malaysia. 5G-capable devices are still limited in the market, while take-up is uncertain at this juncture as overall 5G consumer use cases remain unclear. Meanwhile, the review of the 5G single wholesale network announced by the new government could introduce uncertainties to the pace of the nation’s 5G rollout. Any potential impact can only be ascertained upon the finalisation of the assessment. 

Looking ahead, our stressed scenario assumes flattish revenue for the next three years. Without considering any revenue uplift from 5G, we expect Maxis’ OPBDIT margin to hover around 39% in 2022 before sliding to 35% in 2023 onwards. Factoring in RAM’s analytical adjustments on Maxis’ average adjusted debt of RM10.9 bil over the next three years, our stressed analysis indicates that the Group’s adjusted FFODC will average a strong 0.23 times during the period. 


Analytical contacts
Ho Chian Leng
(603) 3385 2527

Chong Van Nee, CFA
(603) 3385 2482


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.

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