KUALA LUMPUR (Feb 24): Moody's Investors Service said there was no impact for the A3 issuer and senior unsecured ratings of TELEKOM MALAYSIA BHD [] (TM) after it announced a RM1.073 billion capital repayment to shareholders via a share reduction.
The international ratings agency said on Friday the ratings outlook remains stable.
The proposed capital repayment of about RM1.073 billion would be implemented by reducing the par value of each TM share from RM1 to 70 sen per share. The capital repayment will be funded through TM's existing cash balances of RM4.213 billion as of Dec 31, 2011.
Nidhi Dhruv, a Moody's analyst, and lead analyst for TM said: "The capital repayment is consistent with TM's commitment to periodically return surplus cash to shareholders, in the absence of further capex needs or investment opportunities.
“Although, this will weaken cash flow metrics, TM's overall credit profile remains adequate for its rating level given the cash flow generating capabilities of its core business, manageable capex, and relatively low leverage.”
TM's operational performance for 2011 was in line with expectations, and the company exceeded all its headline KPIs. TM achieved a growth of 12.3% on-year in broadband subscribers, supported by increasing High Speed Broadband (HSBB) take-up of over 20% with 230,000 customers.
In 2011, TM also set up a RM2.0 billion Islamic medium-term notes (IMTN) programme, issuances under which have increased reported total debt to RM6.4 billion as of December 2011, resulting in higher Debt/EBITDA of 1.8 times, compared with 1.6 times a year ago.
"However, the company has no material near-term maturities and benefits from a long-dated debt maturity profile. It can sustain a slightly higher leverage at the current rating level because of the relative stability of cash flow, its dominant market position, largely assured access to domestic capital markets, and expected support from the government of Malaysia,” added Dhruv.
TM is the largest fixed-line telecommunications operator in Malaysia. It holds about 98% of the fixed-line market and 93% of the broadband market (excluding hotspot customers) by subscribers.
The international ratings agency said on Friday the ratings outlook remains stable.
The proposed capital repayment of about RM1.073 billion would be implemented by reducing the par value of each TM share from RM1 to 70 sen per share. The capital repayment will be funded through TM's existing cash balances of RM4.213 billion as of Dec 31, 2011.
Nidhi Dhruv, a Moody's analyst, and lead analyst for TM said: "The capital repayment is consistent with TM's commitment to periodically return surplus cash to shareholders, in the absence of further capex needs or investment opportunities.
“Although, this will weaken cash flow metrics, TM's overall credit profile remains adequate for its rating level given the cash flow generating capabilities of its core business, manageable capex, and relatively low leverage.”
TM's operational performance for 2011 was in line with expectations, and the company exceeded all its headline KPIs. TM achieved a growth of 12.3% on-year in broadband subscribers, supported by increasing High Speed Broadband (HSBB) take-up of over 20% with 230,000 customers.
In 2011, TM also set up a RM2.0 billion Islamic medium-term notes (IMTN) programme, issuances under which have increased reported total debt to RM6.4 billion as of December 2011, resulting in higher Debt/EBITDA of 1.8 times, compared with 1.6 times a year ago.
"However, the company has no material near-term maturities and benefits from a long-dated debt maturity profile. It can sustain a slightly higher leverage at the current rating level because of the relative stability of cash flow, its dominant market position, largely assured access to domestic capital markets, and expected support from the government of Malaysia,” added Dhruv.
TM is the largest fixed-line telecommunications operator in Malaysia. It holds about 98% of the fixed-line market and 93% of the broadband market (excluding hotspot customers) by subscribers.
