Axiata’s foreign stake sale will help ease heavy balance sheet

PETALING JAYA: Analysts are positive on Axiata Group Bhd’s possible stake sale in three of its overseas firms as it could help ease its heavy balance sheet.
Axiata is reported to be considering reducing its stake in XL by up to 11% as well as 30% each in Dialog and Smart. The disposal could give rise to US$700 million )RM2.9 billion) for Axiata.
Based on the second quarter results, PublicInvest Research said Dialog and Smart are the only two overseas operations that are still delivering positive earnings growth.
“Including interest cost savings, we estimate a minimal FY17 earnings impact of -2% from this divestment,” it said in a research note yesterday.
In response to the stake disposal plan, Axiata told Bursa Malaysia that it continuously reviews various strategic options to enhance shareholders’ value.
In this regard, since the middle of last year, Axiata has been exploring options to further optimise its balance sheet and group structure, potentially including, but not limited to, the portfolio rebalancing and review of shareholding across subsidiaries,” it stressed.
Axiata said it will make all necessary disclosures at the appropriate time if any such transactions are entered into.
“Until such time, any such reports are speculative,” it added.
MIDF Research said it is neutral on the reduction of its foreign stakes but positive on the reasons for the partial disposal which is to pare down its borrowings totalling RM21.5 billion as at first half of the year.
The high borrowings have elevated the group’s net debt to earnings before interest, taxes, depreciation and amortisation (ebitda) ratio to 1.61 times from 1.25 times in the same period last year.
As at end-June 2016, the three overseas units contributed about 23.6% of the group’s net profit.
MIDF Research said the performance of the Axiata’s main operating segments has been under pressure, with the primary concern on Celcom’s future earnings prospects, which typically contributes more than 60% of the group’s earnings.
With the active corporate exercises the group is currently embarking on, it opined that Axiata’s dividend payout could be capped.