Saturday February 18, 2012

Maxis may pay special dividend following sukuk issuance


PETALING JAYA: A special dividend could be on the cards if the working capital portion of Maxis Bhd’s RM2.45bil sukuk issuance is allocated to shareholders, said analysts.

Maxis is proposing to issue Islamic medium-term notes with a nominal value of up to RM2.45bil based on the sukuk musharakah principle.

The proposed unrated sukuk will have a tenure of up to 30 years from the date of the first issue. Some RM1.45bil will be used for the refinancing of existing loans while another RM1bil will be for capital expenditure, working capital and other general purposes.

“The sukuk could allude to a potential special dividend if the RM1bil (or 13 sen a share) in proceeds earmarked for working capital is flowed back to shareholders,” said an analyst with OSK Research.

He said that his current dividends forecast modelled in a recurring payout of 8 sen per quarter, which implied a payout ratio of 130% and a dividend yield of 7% at current price levels.

Maxis declared a third interim single-tier tax-exempt dividend of 8 sen per share totalling RM600mil when it announced its third-quarter results to Sept 30, 2011, last December. Maxis gave out dividends of 40 sen in the financial year (FY) to Dec 31, 2010.

The RM2.45bil sukuk issuance would raise Maxis’ net debt/earnings before interest taxation depreciation and amortisation (EBITDA) from 1.1 times to 1.7 times, the analyst said. This is consistent with management’s guidance for a longer-term target net debt/EBITDA of 1.75 times.

CIMB Investment Bank Bhd has been appointed the sole principal adviser and sole lead arranger.

The investment bank said the issuance would neither have any effect on the issued and paid-up capital of Maxis nor on shareholders’ holdings, while the consolidated net gearing would increase to 0.75 times from 0.63 times, based on 2010 proforma audited accounts.

CIMB and Maybank Investment Bank Bhd have been appointed joint lead managers for the issuance.

Meanwhile, similar to Bhd, Maxis announced that it enjoyed last-mile broadband tax incentive of RM320mil, comprising RM223mil in respect of prior years and RM97mil for the nine months ended Sept 30, 2011.

The tax credit in respect of prior years will be refunded over five years commencing 2012.

Thus, a Kenanga Research analyst expects Maxis to record net profit of RM2.3bil for its financial year ended Dec 31, 2011, thanks to the mobile broadband network facilities tax incentives.

Maxis’s net profit for the third quarter ended Sept 30 stood at RM537mil, 10.6.% lower than a net profit of RM601mil for the same period last year. For the nine months ended Sept 30, it made a net profit of RM1.63bil compared with RM1.69bil previously.

A Hong Leong analyst said the tax benefit was perceived to be positive for Maxis as it would help relieve its Next Generation Broadband (NGBB)’s high capital expenditure.

“After some channel checking, Maxis’ NGBB business is not ‘flying’ as the company has only managed to secure about 4,000 subscribers to date,” said the Hong Leong analyst.

Tax incentives of RM97mil for the nine months to 2011 translates into a 23% effective tax rate, versus an assumed tax rate of 26%. This directly boost earnings for FY11. The Hong Leong analyst has assumed 23% for FY12 and FY13.

“Tax credit in respect of prior years is assumed to further reduce tax by RM44.6mil for FY12 to FY16,” he said.

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