RAM Ratings reaffirms AA3/Stable rating of BGSM Management''s sukuk

Published on 30 December 2015

RAM Ratings has reaffirmed the AA3/Stable rating of BGSM Management Sdn Bhd’s (BGSM Management or the Company) Islamic Medium-Term Note Programme of up to RM10 billion in nominal value (2013/2043). The reaffirmation of the rating is premised on Maxis Berhad’s (Maxis) well-established position as one of the leading telecommunication companies (telco) in the country. RAM’s analysis of BGSM Management continues to focus on the credit fundamentals of Maxis, given that the latter is the Company’s only source of cashflow to service its financial obligations under the IMTN Programme. Furthermore, the issue rating also takes into account structural subordination as Maxis has considerable priority debt.

Despite heightened competition, Maxis’ restructuring efforts and new product offerings are beginning to bear some fruits in its last 3 financial quarters ending September 2015. Maxis has regained its leadership in terms of subscribers base in the beginning of this year with 35.2% of the total 37 million mobile subscribers as at end-September 2015. Maxis is also the largest mobile operator by revenue and profitability, commanding 37.5% of the total RM17.14 billion of total revenue registered by incumbents and 41.1% of cumulative RM7.71 billion of operating profit before depreciation, interest and tax (OPBDIT) for 9M 2015. Further, Maxis maintained its sturdy cashflow-generating ability, underpinned by its strong profitability, with an OPBDIT margin of 48% in 9M FY 2015 – the highest among local peers.
Given that the cellular telephony sector is saturated, with a mobile penetration rate of 144.8% (end-June 2015), local telcos are expected to face continuous decelerating subscriber growth, increasing price competition and heavier spending on capex that could further compress their margins. Nonetheless, the mobile-broadband segment still has ample room for growth, in line with the current voice-to-data shift underscored by still-low household and population broadband penetration rates of 70.2% and 68.3% respectively.
While Maxis had lifted its performance and market position in 2015, the sustainability of such progress remains to be seen, in view of the heightened competition in the sector. Going forward, Maxis will continue to prioritise capex which could reduce dividend payouts. We envisage BGSM Management (at group level) to register strong funds from operations debt coverage of 0.23-0.27 times between 2016 and 2018.

Media contact
Ong Ju Laine
(603) 7628 1183
julaine@ram.com.my

Affin Hwang Capital Daily Insight (LV) - 31 December 2015 - STAR

Top Calls

Company Update � Star Media (SELL, maintain) - Print remains under pressure We expect prospects for the print media industry to remain weak in 2016 given the challenging market environment, poor consumer sentiment as well as the structurally declining trend of print adex and hard copy circulation. As such, we maintain our SELL rating on Star with an unchanged target price of RM1.95 (based on 12x 2016E EPS).

Other Calls

Morning News and Market Summary

MARC WITHDRAWS RATING ON WCT HOLDINGS BERHAD’S RM600.0 MILLION 5-YEAR FIXED RATE SERIAL BONDS

MARC has withdrawn its rating of AA- on WCT Holdings Berhad’s (WCT Holdings) RM600.0 million Fixed Rate Serial Bonds. The rating withdrawal follows the full redemption of the outstanding RM300.0 million bonds on December 28, 2015 and cancellation of the bond facility as confirmed by the facility agent.

MARC’s analytical coverage on WCT Holdings is now limited to the following rated debt issuances:

·       RM1.0 billion 15-year MTN Programme rated AA-; and

·       RM1.5 billion 15-year Sukuk Murabahah Programme rated AA-_IS.

The outlook on the above ratings is negative.

Contacts: Ngiam Tee Wei, +603-2082 2268/ teewei@marc.com.my; Yap Lai Ken, +603-2082 2247 / laiken@marc.com.my.

December 30, 2015

[This announcement is available in the MARC corporate homepage at http://www.marc.com.my]

CIMB Daily Fixed Income Commentary - 08 Dec 2015

Market Roundup

• US Treasury yields fell on the heels of plunge in crude oil prices, in conjunction with flights for safe-haven assets amid US stock market decline. The Brent crude oil fell steeply and hit the low at $40.60/bbl, from $43.00/bbl recorded on last Friday.  
• Malaysian government bonds saw lighter trading volume and closed barely changed from the previous trading session. A firm MYR in the morning did not stir prolonged interest into bonds especially as MYR moved weaker by the afternoon session to hover above the 4.2200 level. Some pressure on govvies were also felt as interest  looked towards higher yields offered in the PDS segment boosted by a surge in primary offerings in the past 1-2 weeks.
• Thai bond market closed on the King's Birthday.
• Indonesian government Bond went nowhere, traded mixed on quiet market with no catalyst seen this week. We expect most of market players to be sidelined until next week's US inflation data, FOMC, and BI rate decision. Market volume continued dropping to IDR 5.62 trillion.
• Asian dollar credits were rangebound with the iTraxx Asia ex-Japan high grade index barely changed. There was a lack of fresh market drivers especially with last week’s smallish UST gains and ahead of FOMC this week.

CIMB Daily Fixed Income Commentary - 04 Dec 2015

Market Roundup

• US Treasury yields surged, along with the German bunds, after the ECB conducted a softer-than-expected easing measure, by lowering the deposit rate from -0.2% to -0.3%, and extending the end-date for the monthly bond purchases, without stepping up the size. The 10-year German bund yield leaped by almost 20bps to 0.665%. Meantime, DJIA and DAX downed by 1.42% and 3.58% respectively.
• USD pared gains after the ECB disappointed the market with a softer-than-expected stimulus package. EUR/USD spiked above 1.0900 from below 1.0600, short term resistance at 1.1000.
• Malaysian sovereign bonds were dealt in sideways amid volatile movement in USD/MYR, in conjunction with oil price fluctuation ahead of OPEC meeting. The RM4 billion 5-year MGS reopening auction closed on the back of firm demand, with bid-cover reaching 2.47 times. Average yield stopped at 3.873%, in contrast to 3.82/80% WI level quoted a day ago.

·  Thai govvies hovered near prior levels, amid thin bidding interest seen on the bellies of the curve. Apart from that, trading interest eased ahead of US NFP release, as total daily volume shrank from Bt16.4 billion to Bt11.8 billion.

• Indonesia government bond market traded down as USD/IDR went higher to 13850 on Yellen's comments. In general bond market was quiet, and despite some profit taking/selling action seen on Thursday, support bids still appeared on all tenors. Expect market to be cautious ahead of US jobs data. Market volume dropped to IDR 9.1 trillion only.

·  Asian dollar credits were quoted wider alongside the global stock market decline, following the hawkish statement made by Fed chief Janet Yellen a day prior. iTraxx Asia ex-Japan IG Index closed unchanged at 129bps.