UPDATED
KUALA LUMPUR, Dec 5 - Shares of mobile operator TM International Bhd plunged sharply today amid heavy selling by foreign hedge funds on concerns of weak profits and concerns over its loans.
TM International hit its lowest ever level of RM3.04 a share morning trade, matching the day's close of it former parent Telekom Malaysia Bhd.
It finally went down 6 percent to close at RM3.12 for the trading day as 10.5 million shares changed hands, the fourth largest volume for the day.
Analysts said investors were concerned that a weakening rupiah would result in lower contribution from Indonesian subsidiary Excelcomindo hurting, profitability further.
The pan-Asian mobile operator reported a 25.7 percent dip in third-quarter net profit on Nov 26, due to higher losses from its overseas subsidiaries as well as increased financial costs, and its share price has fallen more than 20 percent since.
"We see further downside risks to its share price as the potential and persistent weakening of rupiah against the ringgit would lead to a lower earnings translation from one of its biggest subsidiaries, Excelcomindo," AmResearch said in a note to clients today.
"Based on our estimates, for every 5 percent depreciation in rupiah against the ringgit, XL's EBITDA contribution would be lower by 5 percent. Correspondingly, TM International's pre-tax profit would be lower by 3 percent. As it is, rupiah has depreciated by 20 percent against the ringgit since October 2008."
Last week, Citi Research lowered its target price for TM International to RM4.50 from RM5.40, saying the company faces a challenging year ahead where it has estimated flat margins.
TM International's high gearing was also not ideal in the current environment, Citi said. TM International was listed on the local bourse in April and debuted at RM8.20 a share in a de-merger exercise from Telekom Malaysia.
The de-merger came under fire from some analysts and directors who said it looked more like shuffling paper to create value. But main shareholder Khazanah Nasional Berhad sealed the deal with government backing to create two units with purportedly more value.
As part of the de-merger, TM International owes some RM4 billion to Telekom Malaysia, which it said it can pay by next April's deadline.
Apart from that, it has to settle its RM6.45 billion bridging loan taken out for India's Idea Cellular by August 2009.
It recently appointed JP Morgan and Goldman Sachs investment bankers to restructure its debts and de-gear over time with group chief executive officer Datuk Seri Jamaludin Ibrahim saying they have moved the bulk of short-term debts of RM10.45 billion from next year to 2011/12.
"The remaining amount will be announced shortly. With this, the issue of uncertainty over our capability to repay our debts over the near term does not arise," Jamaludin told StarBiz in an interview.
It has converted RM4.85 billion of the RM6.45 billion bridging loan to a three-year term loan that matures in 2012 from local lenders CIMB and Maybank. It has also obtained another RM2 billion loan facility from Maybank.
TM International is also negotiating with a foreign bank to convert its US$500 million bridging loan.
The mobile operator has also secured a new RM2 billion banking facility that expires in 2011 to repay Telekom Malaysia in December and the balance in cash by the April deadline with Jamaludin saying it can pay cash as its wholly-owned unit Celcom generates nearly RM2 billion cash annually.
But an industry source pointed out that TM International has been getting loans from government-linked-companies (GLCs) CIMB, which is in the Khazanah stable, and Maybank which is under Permodalan Nasional Berhad (PNB).
Incidentally, Maybank chief executive officer Datuk Abdul Wahid Omar was Telekom Malaysia's CEO that oversaw the de-merger exercise.
"TM International is just getting money from domestic sources to fund its obligations and foreign buys and that too from GLC banks. One wonders if the banks are doing it under duress," the industry source told The Malaysian Insider.
Jamaludin himself alluded to a government link in its financing options. He told Starbiz that, "Khazanah Nasional Bhd will also back TM International in all its options, be it equity-based or others. That should allay any fears investors have in the company."
Khazanah has a 45 percent stake in TM International. which will have to take more debts in the future as it will need up to RM5.5 billion in capital expenditure over the next two years. Its current gearing ratio (debt to equity ratio) is 1.5 times.
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By right both Khazanah and Permodalan nasional should be laughing & grabbing for cheap shares in Goldman sachs, GE, USB, citigroup and AIG group. Look at them now, suffering from their short sighted govt policies, loosing billions of the rakyat's money.