edotco has no restraint or constraint in terms of raising debt, and the debt raised can be used to fund the company’s planned expansion
by ASILA JALIL / pic by MUHD AMIN NAHARUL
AXIATA Group Bhd is looking to grow its 63%-owned infrastructure unit edotco Group Sdn Bhd over the next three to five years before the latter goes public.
Axiata president and group CEO Tan Sri Jamaludin Ibrahim said there is no rush to list the company, although edotco is ready for an IPO.
“After discussions with the board, we feel the best thing to do is let it grow because we have huge opportunities, organically or inorganically to grow much bigger than we are today.
“We rather bring in some investors to come in to help us achieve the growth, and three to five years from now, we may consider listing it,” Jamaludin told reporters at Axiata’s third-quarter (3Q20) performance virtual briefing recently.
Axiata deputy group CEO Datuk Izzaddin Idris said the group is in the process to evaluate proposals from private-equity (PE) funds for edotco’s listing.
“We are in a sweet spot because edotco is at where it is today, which is lowly geared now. We are in the process of evaluating two proposals from PE funds to submit proposals to invest in edotco,” Izzaddin said.
edotco is currently at 0.7 times Ebitda. The Ebitda gearing can go up to 3.5 times its capacity to borrow, which translates to a borrowing limit of US$1.5 billion (RM6.1 billion).
He added that edotco had no restraint or constraint in terms of raising debt, and the debt raised can be used to fund the company’s planned expansion.
Axiata’s net income rebounded in 3Q20 ended Sept 30, 2020, as lockdown measures eased across the markets.
Its net profit was up 96.9% year-on-year (YoY) to RM352.99 million from RM179.27 million attributable to higher Ebitda, lower depreciation and amortisation, foreign-exchange (forex) loss and tax.
Turnover, however, fell slightly by 1.6% YoY to RM6.11 billion from RM6.21 billion attributed to a decline in all operating companies (OpCos), except its mobile operations in Bangladesh and Sri Lanka, and the infrastructure segment.
Revenue for its Malaysian operations dropped 4.8% during the quarter to RM1.58 billion, impacted by the Covid-19 containment measures.
Jamaludin described the 3Q20 performance as “a strong quarter” for the company and a big rebound from 2Q20.
To compare, the group’s net profit in 2Q20 slumped 63.7% YoY to RM80.02 million from RM220.56 million as a result of the pandemic.
“Despite the pandemic and heightened competition in a few markets, our teams across the group bounced back convincingly, going beyond overcoming challenges, to excel in almost all areas.
“Almost all OpCos registered compelling growth across all metrics — revenue, subscriber, Ebitda and net profit,” he said.
On a year-to-date basis, the group’s net profit was down 44.8% YoY to RM621.12 million versus RM1.12 billion registered last year partly due to higher depreciation and amortisation, forex loss this year as opposed to forex gain in the previous year.
Axiata’s revenue for the cumulative nine-month period declined 2.1% to RM17.94 billion from RM18.32 billion registered last year mainly due to Covid-19 lockdown measures across OpCo markets.
On a quarter-on-quarter basis, Jamaludin said revenues for all OpCos, except its Nepalese unit Ncell Axiata Ltd, were mostly back to pre-lockdown levels.
The group’s balance sheet for the quarter stood at RM10.7 billion mainly from the US$1.5 billion bond issuances in August, registering net debt-to-Ebitda at 1.88 times and is below the targeted level.
Jamaludin, however, warned of a “potentially soft” 4Q20 due to re-imposition of lockdowns in a few countries. The group also expects a decline in revenue and Ebitda by low single-digit percentage this year compared to last year.
“Given the continued uncertainty surrounding the depth and duration of this pandemic, and the difficulty in predicting the pace of recovery due to new waves on pandemic and consequent implementation of recent lockdowns and movement controls in our selected footprints, he further explains on its 4Q20 performance.
“Added overall deterioration of the economic environment and job losses, the group maintains the withdrawal of 2020 headline KPIs,” he said.
Read our earlier report