Frankly Speaking: Should Axiata proceed with its DRS?

This article first appeared in The Edge Malaysia Weekly, on October 29, 2018 - November 04, 2018.
-A +A

The share prices of Axiata Group Bhd and other telcos have been on a downward trend over the last year amid a challenging operating landscape, regulatory changes, competitive pricing and higher capital expenditure requirements.

Last month, Axiata was not spared declines seen in the broader market as concerns over new taxes and a global market rout weighed on stocks.

Around this time, the company set the issue price for its shares under its dividend reinvestment scheme (DRS) at RM4.26 apiece. This represented a discount of 7.79% to the theoretical ex-dividend price of RM4.62, which was based on the five-day volume weighted average market price up to Sept 26, the last trading day prior to the price-fixing date.

The notice of election was dated Oct 16 and the last date to submit the election form is Oct 30.

It is worth noting that Axiata’s share price has fallen 25% since Sept 26. It closed at RM3.46 last Friday.

While its shareholders can choose to be rewarded in shares or cash, it is clear that the share option has become redundant as they can buy Axiata shares on the market at a lower price.

It is interesting to note that in July, Malayan Banking Bhd cancelled its 16th dividend reinvestment plan due to a drop in its share price and paid an all-cash dividend.

The decision took into consideration the interests of its shareholders and the group’s capital requirements at the time.

Maybank’s board saw the decision as being in line with the bank’s “mission of humanising financial services”, which means doing the right thing at all times, “including being equitable to all shareholders”.

Back to Axiata. Should it proceed with the DRS?

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.