Tackling Telekom Malaysia
As Khazanah’s biggest investment, Telekom Malaysia is perhaps the most notorious symbol of the inefficiencies evident in the country’s public sector. A successful participation in an exchangeable bond and improving financial figures suggest management is starting to turn the company around but it is still falling short of its key performance indicators. Sudip Roy reports.
THE TELL-TALE sign is in the price. When Khazanah, the Malaysian state’s investment arm, became the first borrower to issue an Islamic exchangeable bond in late September it chose Telekom Malaysia as the counterpart into whose shares the bonds can be exchanged.
TM is the biggest firm in Khazanah’s portfolio, and, as such, is most closely associated with the mainly historically pedestrian performance of Khazanah’s various holdings. In the past year, however, as part of Khazanah’s drive to overhaul the companies in which it owns stakes, the telecoms operator has started to clean up its act and make headway in its restructuring. Revenues are up, costs are down and the company’s total outstanding debt is less than 33% of its assets, fulfilling one of the criteria for Shariah compliance.
The success or failure of the exchangeable, for which UBS, HSBC Amanah and CIMB Islamic acted as lead arrangers, would be a good guide as to whether investors believe in the reform story and the price would be the most telling sign of all.